UK to Implement Cryptocurrency Regulations by 2024
The future of cryptocurrencies and blockchain in the UK looks promising, with continued interest from the government and users. Cryptocurrencies, referred to as “Exchange Tokens,” are not banned in the UK and are intended for use as a mode 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 involved in crypto-related activities that fall under existing financial regulations for derivatives require authorization.
It’s worth noting that investors have access to the Financial Ombudsman Service and the Financial Services Compensation Scheme (FSCS) in case of any disputes related to the purchase of cryptocurrencies.
While the FCA recognizes the potential and risks of trading cryptocurrencies, there have been several developments and announcements regarding cryptocurrency regulations in the UK. Let’s take a closer look at the timeline of events:
UK Crypto Regulations 2022:
28-03-2022: The UK government plans to create a regulatory framework for cryptocurrency businesses, with a focus on stablecoins.
15-03-2022: The UK Crime Agency calls for tougher regulations on cryptocurrencies that facilitate money laundering through crypto mixers.
05-02-2022: The UK Government updates tax rules on decentralized finance and staking.
How are Cryptocurrencies Taxed 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 taxed under Capital Gains Tax (CGT). If individuals receive crypto-assets from their employer as payment, they are taxed under Income Tax and National Insurance.
Individuals who acquire cryptocurrencies through mining are also liable to pay tax on their gains, which can vary based on the specific crypto token and the current market valuation.
UK citizens operating crypto exchanges are subject to income tax on the trading profits made with fiat currency.
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 activity, organization, risk, and commerciality.
Notable Events and Announcements:
Various events and announcements have shaped the cryptocurrency landscape in the UK:
2021:
– Her Majesty’s Revenue and Customs (HMRC) introduces a digital service tax on cryptocurrency exchanges operating in the UK.
– Standard Chartered unit announces plans to offer crypto trading services in the UK.
2020:
– The FCA bans the sale of crypto derivatives to retail consumers.
– The FCA lifts the ban on Wirecard UK, restoring services to customers.
2019:
– The FCA proposes a ban on cryptocurrencies to mitigate risks and prevent illicit activity.
– UK police auction seized cryptocurrencies to raise funds.
2018:
– Over 340 UK crypto or blockchain companies dissolve due to slow growth.
– The UK parliament recommends the regulation of the crypto-asset market.
2017:
– The UK and EU governments plan to bring cryptocurrencies under anti-money laundering and counter-terrorism financial legislation.
2016:
– The Royal Mint partners with CME Group to launch Royal Mint Gold, a digitalized gold offering.
– The Bank of England announces plans to launch its own cryptocurrency called RSCoin.
2015:
– HM Treasury publishes a National Risk Assessment of money laundering and terrorist financing, focusing on the risks associated with digital currencies.
– Barclays starts testing Bitcoin and plans to integrate cryptocurrency into online banking.
2014:
– The UK Treasury commissions research on cryptocurrencies to examine their benefits and risks.
– HMRC publishes tax information on cryptocurrencies, outlining the tax obligations for various activities.
2013:
– HMRC confirms that digital currencies are covered by the UK tax system.
In conclusion, the UK provides a favorable marketplace for crypto enthusiasts, with relatively lenient regulations. However, it’s crucial to stay updated on the latest regulatory news and announcements to ensure compliance and protect yourself from scams.