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United Kingdom United Kingdom Guide

Country overview London is one of the major finance capitals of the world. Although not known as a tech capital, the intersection of tech and finance often dubbed “FinTech” has been a flourishing scene in the U.K. It is in close contention with San Francisco and Singapore as the FinTech capital of the world. As […]

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Country overview

London is one of the major finance capitals of the world. Although not known as a tech capital, the intersection of tech and finance often dubbed “FinTech” has been a flourishing scene in the U.K. It is in close contention with San Francisco and Singapore as the FinTech capital of the world. As for cryptocurrencies that technically fall under FinTech, the U.K. has been relatively lax when it comes to regulating cryptocurrencies.

State of Cryptocurrencies in the United Kingdom

Throughout the past decade, the United Kingdom did not have any laws that specifically regulate cryptocurrencies, such as Bitcoin, Ethereum, etc. For them, cryptocurrencies do not yet possess the size and market cap to influence the country’s financial integrity. However, with the growing popularities of Cryptocurrencies, the governor of the Bank of England agrees that regulation of cryptocurrencies will be necessary eventually. They aim to combat scams, money laundering schemes, enforce proper taxation and promote market integrity. The government body in charge of this is the UK Financial Conduct Authority (FCA) who enforces anti-money laundering (AML) and counter-terrorist Financing (CTF) regulations. This covers multiple aspects of the cryptocurrency industry such as ATMs, exchanges, and token issuers.

The FCA also released some policy and guidelines in July of 2019. As with most countries in the world, Bitcoin and other cryptocurrencies are not considered legal tender. It considers cryptocurrencies such as Bitcoin and Ethereum to be exchange tokens and are therefore not yet directly regulated. However, they will still have to adhere to anti-money-laundering regulations.

Exchanges

Cryptocurrency exchanges that want to operate in the United Kingdom have to follow specific rules and regulations set forth by the FCA. They will need to be registered and authorized before operating. However, some crypto businesses can opt to get an e-license instead. Some of the more popular exchanges that have a base of operations in the U.K. include Coinbase, CEX.IO and eToro.

Bitcoin Mining

The United Kingdom may not be one of the first countries you think of when you think of Bitcoin mining since it is most common in places with very cheap electricity such as in Eastern Europe. However, according to DataLight, a cryptocurrency and blockchain analytics firm, the U.K. ranks 6th in the world when it comes to the number of Bitcoin mining nodes. One of the biggest U.K. based mining firms, Argo Blockchain, recently expanded its operations within the U.K. After their expansion, the publicly listed firm will have 17,000 Bitcoin ASIC mining rigs in place.

Crypto Regulations in United Kingdom

As mentioned above, cryptocurrencies have only recently been garnering attention from its government. Over the past decade, the U.K. has been content with taxing cryptocurrencies just like other related traditional businesses. However, the industry has been pushing for more clarity when it comes to regulations since this is what’s needed if the U.K. wants to attract and develop its cryptocurrency industry.

The United Kingdom considers Bitcoin and cryptocurrencies to be unique from other more traditional investments. Therefore, the taxability will depend on the specific activities and individuals involved. As for trading, gains or losses are still subject to capital gains tax. Right now, there are three main taxable scenarios relating to cryptocurrencies:

  • Exchanging crypto to traditional currencies: Once a user exchanges their cryptocurrency for any fiat currency (e.g. Euros, USD or other recognized legal tender), a Capital Gains Tax will be applied immediately.
  • Earning crypto as a form of payment: U.K. residents who are compensated in cryptocurrencies by their employers are required to pay the associative income tax. This includes side jobs, freelance gigs, and other services rendered.
  • Cryptocurrency mining or airdrop acquisitions: Individuals who acquire cryptocurrencies through mining or airdrops are liable to pay Income Tax on all incumbent funds. The amount of taxation will vary depending upon the crypto token and its current market valuation.

Although the U.K. government has been relatively hands off, they’ve slowly been more and more active. In August of 2019, crypto exchanges based in the U.K. report that tax authorities have been requesting user data from them. They have requested transaction details as well as user information aiming to identify cases of tax evasion.

Buying Bitcoin and Cryptocurrencies in United Kingdom

Since there are a handful of cryptocurrency exchanges that operate legally and are regulated in the United Kingdom, the best bet would be to buy from these exchanges. With the amount of volume they get, cryptocurrency exchanges also tend to offer the cheapest rates compared to methods. Popular exchanges to buy from include CEX.IO, Coinbase and Binance’s subsidiary Binance Jersey. They all offer direct pairs for Bitcoin to GBP. This means that you can deposit directly from your UK bank account and trade immediately after. Withdrawal can be done directly to your bank accounts as well.

Bitcoin ATMs are also another option to get your hands on Bitcoin and other major cryptocurrencies. The U.K. ranks in the top 5 when it comes to the number of Bitcoin ATM machines with over 270 machines spread across the country most of which are still centered in London. While some Bitcoin ATMs provide more anonymity, it does charge a higher fee of around 5%-10%. Here is a map of the Bitcoin ATM locations in the U.K. according to Coin ATM Radar.

Spending Bitcoin in United Kingdom

With Bitcoin and cryptocurrencies becoming more and more mainstream in the U.K., it is no doubt merchants are picking up on this trend and offering it as another form of payment. There are currently hundreds of merchants and retailers that accept Bitcoin in the country. This includes major retailers such as Overstock, Gift Off and airBaltic. Luno.com has compiled a list of different merchants that accept Bitcoin and other major cryptocurrencies. Where to spend Bitcoin in the UK.

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