Alderney Bitcoin currency 'a reputational risk'
- 4 December 2013
- From the section Guernsey
A plan to mint money based on the virtual currency Bitcoin could damage the Bailiwick of Guernsey's reputation, Guernsey Finance has warned.
Robert McDowall, Alderney's Finance Committee chairman, has been in talks with the Royal Mint about producing coins based on the online money.
He said commemorative coins brought "a good stream of revenue".
Fiona Le Poidevin, Guernsey Finance's chief executive, said the lack of regulation was one area of concern.
She said the Bitcoin concept had become "increasingly familiar, but it is still in its infancy and this brings with it both challenges and opportunities".
Ms Le Poidevin said the Bailiwick's reputation for high standards was important in generating more business for the islands and needed to be protected.
Mr McDowall said the idea came out of discussions with the Royal Mint and he dismissed concerns about the reputation of the virtual currency.
He said if it went ahead it would involve a commemorative coin being issued by the Royal Mint with the Bitcoin logo on one side and the Alderney logo on the other.
The coins would contain a set amount of gold, so they could be melted down and sold if the Bitcoin currency collapsed.
Upon travelling to the island, anyone with an Alderney Bitcoin would be able to exchange it for either the virtual currency or the sterling value of a Bitcoin at the time.
Alderney and the Royal Mint would make money from the royalties made on the sale of the coins.
Previous coins have marked the total eclipse in 1999, the history of the Royal Navy, Concorde's last flight, the 50th anniversary of the Mini, what would have been the 70th birthday of John Lennon and the engagement of Prince William and Catherine Middleton.
Mr McDowall said: "Part of Alderney's initiative to generate more revenue for the island is looking at what activities it can exploit.
"Amongst those we have a good stream of revenue from issuing commemorative coins."
Some financial commentators have suggested the plans could be a bid to create an international centre for the online currency and even introduce regulation for the increasing popular virtual currency.
Mr McDowall said this was not something being discussed at the moment.
He said: "It gives a certain respectability to Bitcoin and it gives a physical appearance. It's quite a novel issue commemorative coin.
"There's a lot of fuss about this and I don't know why."
He said he did not expect the coins to be bought for anything other than "novelty value" by collectors and those in the computer industry.
Ms Le Poidevin said: "Bitcoin has been associated with some scandal and its very nature means there are risks in terms of the potential for fraud and money laundering."
'Enhance our image'
The value of the online currency fell steeply after a large amount of it was seized in the closure of the website Silk Road, which had been used to trade illegal drugs, and in August security concerns were identified in certain apps used to store the currency.
Ms Le Poidevin said: "We are in an ever-changing world... therefore if the Bailiwick can play a part in addressing concerns by developing the currency, including its regulation, then that could be very positive.
"In turn we may enhance our image as an innovative place to do business and may even be recognised as a leading jurisdiction in the field but any move in this direction may need to carry the label 'proceed with caution'."
Guernsey Finance is responsible for promoting the island's finance industry to international clients.
The Guernsey Financial Services Commission, which is responsible for regulating the finance industry in the Bailiwick, said it was considering the "complex policy and regulatory issues" associated with virtual currency with the States Policy Council and the Law Officers.
In a statement it said: "Those discussions are ongoing with a view to developing an appropriate and informed policy response which will necessarily take into account the inherent reputational risks."
The move to create the coins needs the approval of the States of Alderney.