Traders will be forced to disclose their identities, ending the anonymity that has made the currency attractive for drug dealing and other illegal activities. "We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation", said a spokesperson for the Treasury.
With demand for Bitcoin surging, fuelling a 1,000% rally in its value so far this year, the British finance ministry said it expected negotiations over changes to the European Union rules would conclude later this year or in early 2018.
Is bitcoin an investable asset? I would be surprised if the committee doesn't have an inquiry next year.
Mann was quoted: "These new forms of exchange are expanding rapidly and we have got to make sure we do not get left behind - that is particularly important in terms of money-laundering, terrorism or pure theft".More news: Cold Weather Alert issued as Sussex temperatures set to plunge
He added: "It would be timely to have a proper look at what this means. It may be that we want to speed up our use of these kinds of things in this country, but that makes it all the more important that we don't have a regulatory lag".
Bitcoin hit a high of $11,800 over the weekend. "No central bank stands behind it, no government stands behind it", he told the BBC last week. For me it is much more like a commodity.
United States twins Cameron and Tyler Winklevoss are reported to have become the world's first Bitcoin billionaires, having invested $11m in the currency in 2013.
The plan to introduce regulations for bitcoin was first revealed by the economic secretary to the Treasury Stephen Barclay in late October this year.
Bitcoin suffered big price falls last week but recovered over the weekend, reportedly due to the announcement that the CME Group is to launch its bitcoin futures on December 18.