[5] theconversation.com/bitcoin-the-uk-and-us-are-clamping-down-on-crypto-trading-heres-why-its-not-yet-a-big-deal-147775 On 1 November 2019, HMRC published a guidance document outlining its position on corporate tax transactions with «exchange tokens». On December 20, 2019, it released a similar policy document that updates its guidelines on Bitcoin`s crypto tax for individuals. In addition, HMRC states that it will address the treatment of utility and security tokens in future guidance and summarizes this situation as follows: (4] ftof-finance.co.uk/investment/the-fca-bans-bitcoin-derivatives-all-the-details-you-should-know/; www.zdnet.com/article/uk-ban-on-cryptocurrency-derivatives-comes-into-force-today/ To operate in the UK, crypto exchanges must register with the FCA or apply for an e-money license. Similarly, Bitcoin ATMs are legal in the UK, provided they are licensed and regulated by the FCA. Currently, the UK has the most machines in a European country, with over 250 Bitcoin ATMs across the country. In April 2021, Chancellor of the Exchequer Rishi Sunak tasked the Bank of England «to establish a new working group between the Treasury and the Bank of England to coordinate exploratory work on a potential central bank digital currency (CBDC)» or a national cryptocurrency designed to address some of the current challenges of cryptocurrencies such as Bitcoin. Bank of England Governor Andrew Bailey has already said that the instability and inefficiency of crypto assets are two of the biggest challenges in this process. [1] It controls its customers who buy and sell currencies using Know Your Customer (KYC) procedures at many crypto companies in the UK. KYC can provide companies with information such as customer ID cards, passports, driver`s licenses, and photos.
Thus, KYC represents the process by which customer identities are determined within the framework of crypto regulation. Similarly, customer due diligence (CDD) procedures identify customer risks and take precautions based on those risks. These measures aim to combat money laundering and terrorist financing in crypto transactions. However, the regulation of bitcoin cryptocurrency in the UK is very complex and there are many other issues that need to be addressed. In addition, the UK requires Know-Your-Customer (KYC) and Customer Due Diligence (CDD) checks for all crypto-native business consumers. [11] Similarly, Virtual Asset Service Providers (VPSPs) must maintain detailed records of beneficiaries, perform enhanced due diligence (DED) for politically exposed persons (PEPs) and appoint a person to oversee these compliance and regulatory issues in the broader financial sector. UK-based companies must also comply with the Fifth Anti-Money Laundering Directive (5AMLD), which came into force on 10 January 2020, until further notice. 5AMLD is the first ALMD in the European Union to cover cryptocurrency and bitcoins. [12] According to the owner, HM Revenue & Customs taxes crypto assets such as Bitcoin. In addition, income tax is applied to the business income of persons engaged in commercial activities. As a result, HMRC uses two separate tax systems for individuals and businesses that trade crypto assets.
HMRC first announced tax treatments for cryptocurrencies in the UK in 2014. HMRC then updated its first tax guide. According to HMRC, Bitcoin and other cryptocurrencies are crypto assets, and these currencies are not taxed in the same way as embedded currencies. In addition, HMRC stated in the guide published in 2018 that there are three different types of crypto assets; Utility tokens, security tokens, and Exchange tokens. Cryptocurrencies such as Bitcoin have risen in price in 2020 and 2021, but have fallen sharply this year. NFT – Blockchain-based assets that represent digital files such as images have also proliferated rapidly. UK-based companies must also continue to comply with the 5AMLD until further notice. 5AMLD is the first AMLD in the European Union to cover cryptocurrency and bitcoins in relation to predicate offences, making it mandatory for obligated parties to report illegal activities such as cryptocurrency exchanges, custodians and financial institutions. • CWP: «a company or individual practitioner who provides business services to secure or protect and manage – The main UK laws relevant to the transfer of funds are PSRs and MREs. Together, PSRs and EMRs form a legal framework for persons providing payment services (including, for example, money transfers) and issuing e-money in the UK, including authorisation, organisation, regulatory capital, protection and business conduct requirements. The applicability of this framework depends on whether a service provides payment services or the issuance of electronic money within the meaning of the PSR or EMR. Some of the 30 questions from the UK Treasury`s Cryptoasset & Stablecoin consultation and call for evidence are below.