bitcoin UK budget george osborne
An announcement about bitcoin and its surrounding technology could be made in the UK budgetReuters

UK Chancellor George Osborne is set to make an announcement in the budget 2015 speech (taking place on 18 March) outlining the Treasury's consultation on bitcoin and digital currency technology, according to people familiar with the matter.

A source close to the consultation process told IBTimes UK that Osborne is expected to make the announcement this week, "possibly within the UK budget".

In recent months the UK Treasury has met with members of the cryptocurrency community, including the UK's Digital Currency Association (UKDCA), in order to discuss the emergence of digital currencies and the potential they hold.

The Bank of England has previously suggested that it could issue its own digital currency that uses bitcoin's blockchain technology in order to eradicate the need for third parties to complete transactions.

In a discussion paper published in February 2015, the Bank of England outlined the reasons why a central bank might issue a digital currency:

"The emergence of private digital currencies (such as bitcoin) has shown that it is possible to transfer value securely without a trusted third party. While existing private digital currencies have economic flaws which make them volatile, the distributed ledger technology that their payment systems rely on may have considerable promise. This raises the question of whether central banks should make use of such technology to issue digital currencies."

In response to the discussion paper, Osborne expressed his approval on Twitter that the Bank of England was looking into digital currencies, saying: "Need to ensure UK customers benefit from new tech and fintech [financial technology] firms flourish."

The blockchain - a decentralised, peer-to-peer payments ledger and the core technology behind bitcoin - holds several benefits over current financial mechanisms, including the ability to enable secure transactions made directly between participants.

"This has potentially profound implications for a financial system whose payments mechanism depends on bank deposits that need to be created through credit," the paper stated. "Similarly, technology has enabled the emergence of new business models, such as peer-to-peer lending and crowdfunding."

Before any digital currency could be issued, however, several issues would need to be overcome, most significantly the current lack of clear regulation for digital currency firms.

IBTimesUK will be reporting on the budget throughout the day. Make sure to follow@IBTUKPolitics and read our live blog for all your red box related news and commentary.

Budget 2015: Follow IBTimes UK for coverage throughout the dayIBTimes UK