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Ministers are considering slapping VAT on Bitcoin trades, it emerged today.

Treasury officials are examining how to treat the increasingly popular digital currency.

Former City management consultant Karl McCartney MP grilled ministers on what Britain is doing to modernise its financial regulations to deal with the ground-breaking peer-to-peer payment system.

Treasury minister David Gauke said meetings had taken place with “stakeholders” about the VAT treatment of trades of Bitcoin.

“This is a new and complex issue and the appropriate VAT treatment is currently being considered. HMRC will publish guidance shortly,” he added.

But Mr McCartney believes the authorities have been too slow to act.

He questioned whether tax chiefs were treating Bitcoin “on a par with other currencies that the City of London trades competitively and competently in”.

The Conservative MP for Lincoln added: “Whilst no rushed legislation is usually good regulation, one would hope that Treasury ‘experts’ would have been working to ensure the City of London leads the world with regard to any ‘new’ currency trading, promoting best practice, rather than sadly lagging behind other world currency trading centres, as seems to be the case here.”