The United Kingdom or the UK is one of the largest economies of the world. However, the financial control of the country over the world’s economy has decreased substantially. Still, the World knows this country for its cultural relevance, especially for new trend adoption.
As per a survey conducted by a London-based law firm, 20% of the affluent millennial of the UK have invested in Bitcoin and other cryptocurrencies. So far there is no specific law for Cryptocurrency Regulations in the UK
Identification of Cryptocurrency in the UK
In October 2018 UK crypto assets Taskforce published its Final Report. As per the report, cryptocurrencies are ‘crypto-asset’. The currency can be stored, traded and transferred electronically. However, in the UK the regulations for cryptocurrency are still under the rapid development stage.
Taskforce Report of the UK defines a crypto-asset as a secured asset with digital representation. The report identifies these digital token in below-mentioned three categories:
- Security Tokens
- Exchange Tokens – Currencies & Commodities
- Utility Tokens
The government of the UK has issued warnings for crypto-asset regulations but still, it is legal in the country. Basically, cryptocurrency is not considered as fiat currency or money. Even the Bank of England has ruled out the flow of digital currency in the UK.
UK Crypto Regulation
As we have stated that in the UK cryptocurrency is not banned. The country also does not have any bespoke financial regulatory for the currency as well. As per the UK crypto regulation, the currency may fall under the general financial regulatory perimeter of FSMA or Financial Services and Markets Act 2000. Or it is counted as the payment services under the Payment Services Regulations 2017(PSRs) and Electronic Money Regulations 2011 (EMRs).
Sales Regulations for Cryptocurrency Exchange
For the cryptocurrency sellers, there are some specific regulations in the UK. The regulations are categorized into three broad categories, they are:
- UK Prospects Requirements
- UK Restrictions on Financial Promotions
- Legislation for Consumer Protection and Distance or Online Selling
As per these laws, only a few and a specified amount of cryptocurrency is valid for transfer. However, the classic cryptocurrencies like Bitcoin, Litcoin, and Ether are unregulated exchange tokens. Moreover, the sales of such classic currency must not fall under UK restrictions. The restrictions for sales are also applicable to online or distance selling of digital tokens. The laws are applicable from within and outside of the UK.
The Financial Conduct Authority (FCA)
The Financial Conduct Authority is responsible for regulating the UK’s financial services industry, including combating money laundering and other criminal activities like the financing of terrorism. The exchanges have to be certified by FCA initially before starting any trading.
The image constitutes the basic scenario of FCA authorization. With proper authorization, crypto exchanges are free to perform trade operations in the UK.
Currently, cryptocurrencies do not fall under any tax regulations of the UK government. Especially, for tax principles for business and corporate, there is still uncertainty of the law formation. Although, there is no particular law for cryptocurrency in the country, in December 2018 HMRC or HR Revenue and Customs published a policy paper with the name “crypto-assets for individuals”. The paper specifies the applicability of tax on crypto-assets.
The laws are applicable only for token exchange and it includes the following points:
- Cryptocurrency is not equal to currency or money and buying and selling of the currency is not same as gambling and CGT may apply on the currency
- As per HMRC law buying and selling of the currency is not a personal investment activity
- In any trade of the currency by an individual, IT will take priority over Capital Gains Tax or CGT.
As you see, there are some minimal laws imposed on cryptocurrency.
As states that there is no bespoke financial regulatory for cryptocurrency traders in the UK. The country also permits the Mining of these digital tokens. As a result mining of the currency is smoother and regulated in the UK. Mining activity also does not fall under any existing financial regulation as well.
Future of cryptocurrency in the UK
In 2018 the Governer of Bank of England, Mark Carney that soon there will be some specific regulations for cryptocurrency in the UK. For regulation formation, FCA is working with BOE and UK Treasury. The policies will soon take place and it will deal with the involved risk for cryptocurrency. The policy and law mainly will focus on AML/CFT and financial stability. The country will soon form and declare the guidelines.
So, trading of cryptocurrency like digital tokens is quite smooth and non-restricted in the country. Therefore various activities like mining, exchange, selling and buying are quite frequent within and outside the country.