Regulations on Cryptocurrency in the UK by 2024
Cryptocurrencies and blockchain technology have a promising future in the UK, as the government and users continue to show interest. Unlike some countries, cryptocurrencies are not banned in the UK and are not subject to specific regulations. In the UK, cryptocurrencies are referred to as “Exchange Tokens” and are intended for use as a form of payment. However, they are regulated for money laundering purposes.
Cryptocurrency exchanges in the UK are generally required to register with the Financial Conduct Authority (FCA). The FCA guidelines state that entities engaged in crypto-related activities that fall under existing financial regulations for derivatives must obtain authorization.
It is worth noting that the UK government allows access to the Financial Ombudsman Service and the Financial Services Compensation Scheme (FSCS) in case of any disputes related to the purchase of cryptocurrencies. This provides investors with additional protection.
However, the FCA acknowledges both the potential and risks of trading cryptocurrencies. So, what is happening with cryptocurrency regulations in the UK? Let’s take a look at a timeline of events and announcements related to the crypto industry in the UK.
UK Crypto Regulations 2022
28-03-2022: The UK Government Plans to Regulate Crypto
The United Kingdom is in the process of creating a comprehensive regulatory framework that outlines how cryptocurrency businesses can establish and operate in the country. The focus is particularly on stablecoins, a type of token that derives its value from existing currencies like the U.S. dollar. British Finance Minister Rishi Sunak is expected to announce this regulatory regime in the coming weeks.
15-03-2022: UK Crime Agency Calls for Stricter Crypto Regulations
The UK crime agency has called for regulations on a cryptocurrency that allows transactions to be disguised on the blockchain and facilitates money laundering through the use of crypto mixers. These decentralized crypto mixers enable criminals to operate on the dark web while laundering money.
05-02-2022: UK Government Updates Crypto Tax Rules on DeFi, Staking
The UK’s tax authority, Her Majesty’s Revenue and Customs Office, has updated the tax rules governing decentralized finance and staking. The updated rules provide guidance on how returns related to DeFi or staking should be classified as income or capital gains. The guidance is designed to help individuals determine the nature of their returns.
Taxation of Cryptocurrencies in the UK
In the UK, crypto-assets are taxed differently depending on the scenario. When individuals use crypto-assets for personal purchases, they are subject to Capital Gains Tax (CGT). If individuals receive crypto-assets from their employer as payment, they are taxed under Income Tax and are also required to contribute to National Insurance.
Individuals who acquire cryptocurrencies through mining are liable to pay tax on their gains. The amount of taxation varies depending on the specific crypto token and the current valuation of the UK crypto market.
UK citizens who operate crypto exchanges are required to pay taxes on the trading of cryptocurrencies with the UK fiat currency. They are subject to income tax on the trading profits they earn.
Cryptocurrency Mining in the UK
Cryptocurrency mining is allowed in the UK without specific regulations. Taxes are only applied when a cryptocurrency is awarded through successful mining. The tax on cryptocurrency mining depends on factors such as the degree of activity, organization, risk, and commerciality.
Historic Events and Announcements
The timeline below highlights significant events and announcements related to cryptocurrencies in the UK:
2021
– Digital service tax levied on UK crypto exchanges.
– Standard Chartered unit launches crypto trading services in the UK.
– White House reviews crypto regulations.
– Wirex launches multi-currency Mastercard debit card.
– UK tax authority updates treatment of Crypto Assets corporate staking.
2020
– UK bans sale of crypto derivatives.
– FCA lifts ban on Wirecard UK.
– Birmingham City University develops digital safety certificate based on blockchain technology.
– FCA warns public about scams amid the COVID-19 pandemic.
– Coinfloor focuses on consumer BTC services.
– FCA posts job for cryptocurrency and blockchain expert.
– Bank of England considers adopting cryptocurrency.
– Ex-Barclays employee plans to launch UK’s first regulated crypto bank.
2019
– FCA proposes ban on cryptocurrencies.
– UK police auction seized cryptocurrencies.
– UK crypto and blockchain companies dissolved.
– UK parliament recommends regulation of the crypto-asset market.
– FCA proposes creation of Global Financial Innovation Network.
2018
– FCA announces ban on sale of crypto-derivatives.
– FCA lifts ban on Wirecard UK.
– University in the UK develops digital safety certificate.
– FCA warns public about scams amid the rise of cryptocurrencies.
– Coinfloor launches physically delivered Bitcoin Futures.
2017
– UK and EU plan to bring cryptocurrencies under Anti-Money Laundering Act.
– FCA warns customers against investments in cryptocurrency CFDs.
– UK parliament discusses amendment of Anti-Money Laundering Act.
2016
– The Royal Mint partners with CME group to launch digitalized gold offering.
– HM Treasury confirms digital wallet providers are not subject to Anti-Money Laundering Act.
2015
– HM Treasury publishes UK National Risk assessment of money laundering and terrorist financing.
– Bank of England chief economist proposes abolishment of paper cash.
– Barclays tests Bitcoin and plans to integrate cryptocurrency into online banking.
– London-based Coinfloor launches P2P marketplace.
2014
– Chancellor George Osborne commissions research on cryptocurrencies.
– HMRC publishes tax information on cryptocurrencies.
2013
– HMRC states that exchanges are not required to register under money laundering regulations.
– HMRC confirms digital currencies are covered by UK tax system.
These events and announcements reflect the evolving nature of cryptocurrency regulations in the UK. While the government has provided a relatively free environment for cryptocurrencies, it also keeps a close watch and takes steps to regulate the industry. It is essential for crypto enthusiasts to stay updated on the latest regulatory news and announcements to ensure compliance with the law.