Cryptocurrency regulation

Cryptocurrency Regulations in the UK

Hi, This is Qadir A.K, Crypto lover and Research Columnist. 

My First Synopsis on Australian Crypto Regulations was a Great Success!  

I Bring you the second chapter of my new learning series of 2020- “The Cryptocurrency Breakthrough: Synopsis 2 ”

Cryptocurrency Regulations in the United Kingdom

It was an amazing experience to Pen United Kingdom’s regulations and policies on the deck of Cryptocurrencies.  In this article, I have Put Down the scratch and top of Cryptocurrency regulations in the UK that every beginner or Crypto enthusiast must read once. 

Here We Go! 

The United Kingdom is one of the largest economies with London being the second largest financial center in the world. The current finance market affairs have open doorways for Cryptocurrencies to feed into the business and economy of the UK. Also, with the ongoing Interest of UK governments and users, there seems to be a Good future of Cryptocurrencies and blockchain. 

About 20% of Millennials in Australia have Invested and Active Cryptocurrencies users, according to a survey. This Sharp rise happened when the government decided to implement Blockchain technology in sync with Cryptocurrency regulations. Added these assets into the Anti-Money Laundering Act.

What did the Governor Do about the Regulations?

It’s Interesting to know how the government controls these activities. 

The UK financial regulators every now and then issue warnings related to investments on cryptocurrencies but haven’t banned till now. On the other hand, banks consider that the stability of the UK’s financial market may depend on cryptocurrencies and their risks. However, the market size of cryptocurrencies is not so large that it could adversely affect the finances of the country.

In a recent tweet, the Australian Entrepreneur Brendan Gunn Tweeted about the FCA ( Financial Conduct Authority ) announcement that it will now involve as anti-money laundering and counter-terrorist financing (AML/CTF) supervisor for businesses carrying out certain crypto asset activities under the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs).

It is also important to note the Government’s provision to access to the  Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS) was allowed – The investors can use these services in case of any dispute in the purchase of cryptocurrencies.

Cryptocurrencies Tax in the UK 

Here in the UK, tax on crypto-assets are in two different scenarios under two different taxes, but both for the individuals themselves.

  •  One is when the individuals who hold crypto-assets and utilize them for their personal purchases. Here they are taxed under Capital Gains Tax  (CGT). 
  • In the other case, the individuals are taxed under Income Tax and also liable to contribute under National Insurance when they receive crypto-assets from their employer in the form of payment.

A UK citizen who operates crypto exchanges is subjected to pay taxes on the trading of cryptocurrencies with the UK fiat currency. Here, the individual is charged with income tax on the trade profit earned.

Recently in February 2020, the UK government showed signals of regulating the cryptocurrencies including Bitcoin. ( Please see below Latest events for more detail about this ) 

Cryptocurrency Mining Criteria in the UK 

Like other countries, cryptocurrency mining is allowed in the UK without any specific regulations. The taxes will be applied only when a cryptocurrency is awarded upon successful mining.

The tax of cryptocurrency mining depends on 4  different factors: Degree of activity

  • Organization
  • Risk
  • Commerciality

Series of Events 

2020

19-02-2020:- London based Bitcoin exchange, Coinfloor now focuses on consumer BTC services. These include ‘NO BS Education’ which will provide free access to provide simple and trusted knowledge about cryptocurrencies. Emphasizing on the need of this information portal CEO and Co-founder of Coinfloor Obi Nwosu said,

 “Too many of our peers provide questionable, complicated and dishonest services to try and exploit novice consumers. […] It’s just as important to honestly educate people about crypto in clear language and reduce the complexity that prevent widespread adoption and stopped Bitcoin from fulfilling its incredible potential.”

06-02-2020:- The FCA, UK’s financial industry regulators posted a job for a cryptocurrency and blockchain expert. This was done on the virtue of a better understanding of the concept and also to monitor this sector to minimize the scams.

21-01-2020:- Bank of England to consider to adopt cryptocurrency. The bank officials will carry out complete research by meeting the Central Banks of Japan, Europe, Canada, the Swiss Bank and Bank for International settlements. The main objective would be to examine the better way the country could adopt Bitcoin-style digital currency.

02-01-2020:- Mark Hipperson, an ex-employee of Barclay’s group heading the Technology for a decade and former CTO at UK challenger bank, is planning to launch UK’s first regulated Crypto Bank in 2020.

2019

29-10-2019:- The UK’s Financial Regulator, FCA proposed a ban on cryptocurrencies. The ban was proposed amid the growing popularity of crypto-assets in the millennials. FCA mentioned that it wants to mitigate the risks to the customers and market integrity and prevent the use of crypto-assets for illicit activity. The FCA also reported that the crypto investors lost over $34 million due to forex scams in the year 2018-19.

Following the report from FCA, the regulators intensified their investigations on cryptos by 74% as compared to that of 2018.

27-09-2019:- UK police raised about $369,000 by auctioning the seized cryptocurrencies above the market value. In total, 62 lots of cryptocurrencies including Bitcoin, Ethereum, Ripple and Bitcoin Satoshi version were sold. The currencies were on seize by 20 yr old Norwich man Elliot Gunton who was found guilty of supplying stolen personal data and hacking services in exchange for cryptocurrencies. He was sentenced to 20 months imprisonment and a fine of $491,000.

2018

24-12-2018:- At least 340 UK Crypto or Blockchain companies were dissolved due to the low growth rate. In the due course, 60-70% of the employees were laid off.

19-09-2018:- The UK parliament issued a report which recommended regulation of the crypto-asset market. The report mentioned that the currencies have no inherent value and could pose risks for inexperienced investors. The report also mentioned that the self-regulatory bodies within the crypto market were insufficient to address the concerns of customers and anti-money laundering laws. 

07-08-2018:- The UK Financial Conduct Authority proposed the creation of the Global Financial Innovation Network (GFIN). GFIN could be a collaborative effort with twelve financial regulators across the globe. This would provide a free passage for all the regulators to interact and navigate regulators while building new ideas.

11-06-2018:-  The regulation authorities, Prudential Regulation Authority(PRA)  and Financial Conduct Authority(FCA) issued a written letter to the CEO’s of banks, insurance companies, and investment firms. In the letter, the CEO’s were reminded of the obligations under the PRA and FCA rules providing services to clients relating to crypto-assets.

06-04-2018:- The FCA on this day announced that the companies offering cryptocurrency derivatives need to comply with the FCA rules and EU regulations. According to the FCA statement, the derivatives that are bought under their rules are Cryptocurrency Futures, Cryptocurrency contracts for differences (CFDs) and Cryptocurrency options.

22-03-2018:- UK Chancellor of the Exchequer, Philp Hammond announced the creation of ‘crypto-asset taskforce’. This force will include the Bank of England and the Financial Conduct Authority in addition to the treasury. The step was taken to manage risk around the cryptocurrencies as well as harness the potential benefits of the technologies.

15-03-2018:- UK crypto exchange Coinfloor announced to launch the world’s first physically delivered Bitcoin Futures in April 2018. The exchange confirmed the news via twitter.

2017

04-12-2017:- The UK and the other EU governments together plan to bring bitcoins and other cryptocurrencies under the Anti-Money Laundering Act and Counter-Terrorism Financial Legislation. Under this legislation, traders would be forced to disclose their identities, putting end to any speculation of drug dealing or illegal activities.

14-11-2017:- The UK’s FCA issued a warning to the customers against the investments for the cryptocurrency’s Contract-for-differences(CFD’s). CFDs are complex financial instruments that allow the user to speculate the price of an asset. They are offered with leverage which multiplies with the profit or losses. And hence the risk of losing money is very high.  The risks include price volatility, leverage potential multiplying the losses of the investor, fees and lack of transparency. 

27-10-2017:- The UK parliament is in discussion with the EU for the amendment of the current Anti-Money Laundering Act. The proposal within this Act included bringing the digital currency exchange platforms and custodian wallets under existing legislation.

2016

02-12-2016:- The Royal Mint, HM owned institution has paired with CME group to build and launch a digitalized gold offering called Royal Mint Gold(RMG). The royal mint is expected to put $1 million worth of gold on blockchain technology that will enable the customers to own and trade fractions of gold stored in their royal vaults.

25-04-2016:- The UK Treasury said it would not bring digital wallet providers under Anti-money laundering Act. The UK Treasury said:

“This [focus on exchanges] is consistent with a risk-based approach, and we note that extending the perimeter of anti-money laundering regulations beyond digital currency exchange firms (eg to wallet providers) would not deliver any benefits in terms of mitigating money laundering and terrorist finance risk, and would place significant burdens on firms in this innovative and embryonic sector.”

15-03-2016:-  The Bank of England announced its plan to launch its own Bitcoin-like cryptocurrency called RSCoin. The new coin will function on blockchain technology.

2015

October 2015:- The HM treasury published ‘UK National Risk assessment of money laundering and terrorist financing’. The report involved a detailed report of the risks involved in dealing with digital currencies.

18-09-2015:- The Bank of England’s chief economist Haldane, proposed abolishment of paper cash replacing with state-backed digital currency. 

Haldane said, “The introduction of an electronically-issued government-backed currency would preserve the social convention of a state-issued unit of account and medium of exchange. But it would allow negative interest rates to be levied on currency easily and speedily, so relaxing the Zero lower bound constraint.”

01-09-2015:- British banking firm Barclays start testing Bitcoin and also plans to integrate cryptocurrency into Online Banking. The UK government also invested 10 Million Pounds in the research of cryptocurrency.

02-07-2015:- London based Coinfloor, a Bitcoin exchange, launches its own P2P market place allowing investors and consumers to buy from bitcoin brokers in a safe environment

 Coinfloor CEO, Mark Lamb said, “Our founding members are key to the success of Coinfloor Market. Just as the NYSE was committed to a decentralized network of brokers backed by a centralized exchange. Coinfloor is the first institution in the Bitcoin industry to mirror this proven model.” 

March 2015:- At the end of March, the HM treasury released a report regarding the benefits and risks of cryptocurrencies. In the report, it mentioned its plans to regulate bitcoin exchanges.

2014

06-08-2014:- The Chancellor Geroge Osborne commissioned a treasury to research on cryptocurrencies examining their benefits and risks.

 Osborne said, “It’s only by harnessing innovations in finance, alongside our existing world-class knowledge and skills in financial services, that we’ll ensure Britain’s financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future.”

Osborne also attended a demonstration of Robocoin ATM operated by cointrader.net and purchased a bitcoin.

03-03-2014:- HMRC published a document regarding the tax information on the cryptocurrencies. In this report, HMRC lists out the tax collected with activities involved in Bitcoin or any similar cryptocurrencies. According to the report, Bitcoin or any similar cryptocurrency is liable for VAT, Capital Gain Tax(CGT), Income Tax( IT) or Corporation Tax(CT) for various activities.

2013

08-07-2013:- HMRC in a reply to a letter from Joel Dalais, director of exchange FYB-UK, said that exchanges are not subjected to register with HMRC under money laundering regulations at present.

19-06-2013:- Her Majesty Revenue & Customs(HMRC) says that the digital currencies are covered by the UK tax system. The profits on the currencies are subjected to taxes.

Closing Note 

The UK’s marketplace could be best suitable for crypto lovers as no strict rules are applied. Not only dealing with crypto’s, if you carry out your business within the circumference of the laws, then no worries at all!!!

Same here in the UK, the government no doubt has given a free hand but also kept a close watch. Despite this many scams do occur, many people do get fooled but some prosper also. The regulatory authorities always wanted to bring cryptos under regulation.

My suggestion to all my readers and crypto lovers, Please do keep yourself updated by the latest news or announcements. And do track the updates here also. And always share what you like!!!

Recommended Read:- The cryptocurrency Breakthrough 2020: Synopsis 3, Regulations in the European Union

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Qadir AK

Qadir Ak - Co-founder of Coinpedia Blog - His interest as crypto Author, Editor, Speaker at cryptocurrency conference has made him known as passionate blogger and startup in Asia.

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