UK Finance Minister, George Osborne, said recently in a speech at London’s Canary Wharf that the government was actively exploring the risks and rewards of introducing virtual currencies, like Bitcoin, into the economy.

Minister Osborne was comment upon a new study investigating the potentialities of Fintech (Finance technologies). These cutting edge methods of transacting would drastically reduce the cost of printing, storing and transporting money. They would make transactions incredibly mobile and streamlined.

Minister Osborne was addressing the launch of Innovate Finance; an industry business created to oversee the emerging fintech industry. Amongst the new body’s tasks will be keeping track of emerging digital currencies, mobile banking apps, and crowdfunding platforms.

“With the right backing form government,” Mr Osborne old the crowd, “I believe we can make London the fintech capital of the world.”

UK Finance Minister George Osborne. Photo: www.theguardian.com

UK Finance Minister George Osborne. Photo: www.theguardian.com

Bitcoin was one of the earliest ‘virtual’ currencies. It enabled holders of Bitcoin currency to exchange credits for goods and services. The currency received its value online through a process known as computer mining. In this scenario value would arise from having a computer perform difficult tasks. At present it is estimated there are 13 million Bitcoins in circulation.

Just as a central bank will maintain the value of a currency through releasing or withholding printed money in an economy, so too does bitcoin. Regulators have imposed a cap of 21 million bitcoins, meaning no more can be produced once this figure is reached.

Holders and creators of virtual currencies, like Bitcoin, are thrilled with the announcement of government regulation. In a sense, such regulation legitimizes their currency, such legitimization will only attract more users, and more users means more value.

There are, however, opponents to regulation of Bitcoin. Many enthusiasts believe any centralized authority will threaten the anonymity of its users.

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