Regulations surrounding cryptocurrency in the UK have been measured for a long time. However, post-Brexit they have started to mature given the financial landscape. In 2020, UK categorized crypto assets under the heading of property. However, there are no specific laws surrounding Bitcoin and it’s not legal tender.
The Bank of England states that Bitcoin cannot be considered money in its truest sense since cryptocurrencies don’t have a proper definition. At the same time, they don’t threaten the system of banking or its stability. Additionally, the bank has also issued warnings regarding the use of Bitcoin. This is owing to the fact that Bitcoin’s regulations and status keep changing and are dependent on the nature, use, and type. These warnings also deal with the same so that traders are wary of the problems associated with speculative trading and volatility. Many UK traders safely buying & selling bitcoins at https://british-bitcoinprofit.com/ consider bitcoins to be a very reliable investment option for at least the next 3 decades.
In order to address the uncertainty that is linked to the regulation of Bitcoin, the government of the UK established a task force in 2018. It defined three types of cryptocurrencies in addition to the three ways in which crypto assets can be used. Additionally, it has also set out a requirement for taxation considerations. HMRC has briefed on the treatment of Bitcoin by highlighting that Bitcoin has a unique identity as it cannot be compared to traditional payments and investments. As a result, its taxability will be dependent on activities and the parties involved. Any profit on loss in Bitcoin will be subject to capital gains tax.
Bitcoin Exchange Regulations
In the UK, there are registration requirements on exchanges in UK. Even though it’s no longer there in the EU, UK did transpose regulations and requirements concerning Bitcoin. It was set out in 5AMLD and 6AMLD in domestic law. All Bitcoin asset firms in the UK such as Bitcoin exchanges, investment managers, advisers, and professionals have to register with the FCA or Financial Conduct Authority. The aforementioned assets usually have a presence in UK markets and also serve residential clients in the UK.
These groups have to comply with customer protection obligations and AML/ CFT report. The FCA guidelines stress the fact all entities engaging in Bitcoin activities have to be in compliance with the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). These regulations were amended in January 2020 to incorporate the most recent guidelines of the FATF.
Introducing FCA guidelines hasn’t been a very smooth process though. FCA declared in late 2020 that Bitcoin derivatives from retail activities will no longer be legal from January 6, 2021. This was done to protect consumers from the volatility of markets. In December 2020, FCA established a temporary registration regime due to difficulties encountered in registering Bitcoin-based businesses. The deadline for this temporary regime was July 9, 2021.
Bitcoin Taxes in the UK
Bitcoin taxes in the UK differ for individuals and business firms. HMRC declared that due to its unique identity, taxes imposed on Bitcoin-based activities won’t be the same as conventional business activities. The crypto-assets taxation policy was outlined by HMRC in December 2019. For individual purposes, crypto-taxes are dependent on the following condition.
The particular losses and gains taxed under capital gains and additional activities individuals pursue such as skating and mining to name a couple.
Bitcoin taxes for business activities are subjected to the following taxes. They are supposed to pay one or more of them.
- Capital Gains
- Corporation Tax
- Income Tax
- National Insurance contributions
- Stamp Duty
- Value-Added Tax
Bitcoin ATMs in the UK
In the UK, Bitcoin ATMs are legal only if they can generate a license by the FCA and are also regulated by the same. As of today, there are 250+ Bitcoin ATMs in the UK. Users can purchase Bitcoin from these ATMs. This is the largest number of ATMs that are present in any European country.
Future Regulations for Bitcoin
Having exited the European Union in 2020, the Bitcoin regulations of the UK are likely to remain the same in the short run with the bloc. It will be implementing directives that are the same as that of the EU in terms of Market in Crypto-Assets and E-Money proposals.
There is very little chance that UK will not diverge from the Bitcoin regulations promoted by the EU in the future. There is no legislation pertaining to Bitcoin presently in the UK even though HM treasury issued a UK Crypto Asset Task Force back in January this year. The focus of this task force is to bring Bitcoin under the radar of financial promotions regulations. It will also continue approaching these assets with a broader regulatory approach.
Specifically, the report deals with regulating stablecoins, something that FCA has banned. A subsequent report by FCA in February called for flexibility in regulation. There is a chance that stablecoins will be introduced and the regulations regarding crypto-assets might not remain the same as well.