Supposing a UK based exchange did manage to satisfy the banks and regulatory agencies that it was in compliance with all the relevant legislation, would anyone actually use it?
The Money Laundering / Terrorism / Payment Services regulations would seem to suggest that a compliant UK exchange would look something like this ...
Registration would involve:
- Sending a certified copy of Passport / Driving Licence (that is, a copy signed by e.g. an accountant / notary / bank manager).
- And a certified copy of a recent bank statement (not an online one!).
- Entering your address history for the last three years.
- Consenting to a credit check / electoral roll search.
- Waiting for a secret code to arrive by post and entering that to verify current address.
There would be no ability to send or receive bitcoins other than to/from a single bitcoin address you control. Changing that bitcoin address would probably require a lengthy process involving sending documents by post.
Deposits and withdrawals would involve paying a 1% fee to cover bank charges (faster payments aren't free for businesses). They would only be possible to/from your verified bank account (which must be in your name).
Additional fees would probably have to be levied to cover the cost of regulatory compliance - say 0.5% on every trade.
Any transaction you make (deposit, withdrawal, trade) may be suspended for up to a week if it looks a bit unusual or suspicious - but the exchange wouldn't be able to tell you why they suspended it, since that would be a criminal offence ("Tipping Off").
Deposits and Withdrawals above £10K (or that add up to £10K per month, or that look "a bit funny") would probably require such extensive due diligence that even talking about the due diligence is illegal.
Sounds fun, eh? Any ideas for domain names - I notice
www.painfulbitcoins.co.uk is free.
Do those regulations apply to digital currency though? I mean, say for example I create a game and you can purchase digital items with Bitcoins, how can the government say no, no video game currency for you and what makes the currency any different legally speaking? I hope this does not come across as disagreeing, the more I think about it the more I start to think it is BS and the regulation is biased. What if, I created a game where you could store GBP in a virtual character and over an international server, that currency was converted to BTC, then instead of trading with BTC you could sell/buy the virtual characters. I guess that is the same concept as selling wallets but people sell video game characters all the time, perhaps this is a loophole?
is dead, don't tell me the bankers got them too lol.