The UK government is to explore the potential role that Bitcoin and other cryptocurrencies could play in the financial system, and whether they need to be regulated.

The plans will be revealed by Chancellor George Osborne in a speech later today in which he will set out measures to make Britain the “global centre of financial innovation”.

The Chancellor is expected to say:

“It is only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we’ll ensure Britain’s financial sector continues to meet the diverse needs of businesses and consumers here and around the globe”.

Bitcoin is fast growing in popularity, and excitement over its potential uses is fuelling a fledgling economy of digital currency startups.

More than 60,000 online retailers now accept bitcoin worldwide, as well as many bricks and mortar outlets, pushing the currency ever closer to mainstream adoption.

However, Bitcoin is still a project in development, and has been criticised for being volatile and overly susceptible to hackers.

The Chancellor’s speech will also include plans to make it easier for small and medium-sized enterprises (SMEs) to get loans from alternative sources, if they have already been turned down by banks.

Business Secretary Vince Cable said that SMEs often give up once turned down by a bank, and that there should be a more diverse range of options, like in Germany or the USA.

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