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The UK's HMRC Begin Tax Talks for Cryptocurrency

November 2019 has seen newly published guidelines come into place, with Her Majesty’s Revenue and Customs (HMRC) collecting advice and consulting with third parties to create new principles on different taxes in the United Kingdom.

The following taxes have been discussed:

Corporation Tax

The HMRC believes that all transactions falling under this type of tax will require payment. Usually, this will result in taxpayers paying for any profits made on trades or other chargeable gains. A big difference between the UK tax requirements and the American IRS requirements is that if a hard fork is made, generally, no tax will be payable on receipt of the newly formed cryptocurrency. This would be similar to Bitcoin, forking to Bitcoin Cash, etc.

Employment Tax

Any person receiving crypto payment for work or services will be required to pay tax. In the UK, this will mean that National Insurance and Income tax must be paid, following normal employment tax contributions.

Stamp Tax

There will be no tax payment required. Following the HMRC deciding crypto assets are not stock or securities.

VAT

Value-added Tax (VAT) does not require Tax payment from crypto assets. The only requirement is that any good, product or service, pays the VAT as standard.

The UK will want to grow their crypto regulations as they aim to maintain their social status as a financial hub. The following thought leadership is an excellent sign of more to come.

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UK’s First Regulated Crypto Bank to be Launched by Former Barclays Tech Head

The former Head of Technology for the Barclays group, and former CTO at Starling Bank in the UK, Mark Hipperson is planning to launch a regulated crypto bank with his digital banking venture Ziglu.

Foreign currencies will be made available for exchange at interbank rates, and cryptocurrencies sell and buy prices will also be at the best price across various exchanges.

By using a Mastercard debit card, any currency held in the account can be spent anywhere in the world, including cryptocurrencies, which are converted at the time of sale.

Ziglu has applied to the UK’s Financial Conduct Authority (FCA) to become a regulated issuer of electronic money. Currently, only UK residents who are over the age of 18 are permitted to use Ziglu’s services and are eligible to apply for an account.

FCA’s policy statement on digital assets

The FCA first issued a finalized policy statement on digital assets in August 2019, titled “PS19/22: Guidance on Cryptoassets”. This policy statement update is in response to the feedback received from the previous policy statement issued in January. The objective of the final guidance is to bring more clarity on the regulation for the existing types of digital assets.

Bitcoin and Ether, which are considered major cryptocurrencies, are classified as “exchange tokens.” These exchange tokens are not backed by any central authority and are usually decentralized and primarily used as a means of exchange. The FCA has stated that they will not be regulating exchange tokens. However, Anti-Money Laundering regulations still apply.

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eToro Plans to Launch Debit Card in UK Ahead of Robinhood

Investment app eToro has acquired Marq Millions Limited, the UK based e-money business, to launch its debit cards to UK customers.

Marq Millions will now be rebranded as eToro Money and would be the issuer for eToro’s debit cards as the exchange expands its range of products for UK customers.

Strategy to Take on Rival

The cards would be initially available to eToro customers in the UK, then expanded to Europe, and later would be extended to non-eToro users in other markets. eToro expects the debit card take-up to be strong.

eToro Money has an EMI license permission from the Financial Conduct Authority (FCA) and a principal membership with VISA.

eToro co-founder and CEO, Yoni Assia, said that the commitment to launch a debit card is a natural step that eToro undertakes to broaden a variety of services that it offers to its customers. The CEO mentioned that the debit card would provide instant cash-in and cash-out functionality, a feature that the company’s user-base has been requesting for a long time.

eToro allows customers to invest in commodities and stocks, as well as for cryptocurrencies like Bitcoin. The company says that it has 14 million registered customers, all of whom share their investment strategies, the same way as a social network. The firm is regulated in Australia by the Australian Securities and Investments Commission, in the UK by the Financial Conduct Authority (FCA), and by the Cyprus Securities and Exchange Commission in Europe.

Meanwhile, eToro is racing to build up its user base in the U.K ahead of a potential launch of a rival new product by competitor Robinhood. The US-based investment app Robinhood has made waves in the United States but has delayed its launch in the U.K indefinitely as it struggles to address pressure from U.S politicians after one of its customers killed himself. The customer, a 20-year old student, Alex Kearns, killed himself last month, apparently in the mistaken belief that he had lost £575,000 ($730,000) by using the app.

In the recent past, Robinhood said that it had a waiting list of over 250,000 people in the U.K ahead of a planned launch for this year. This clearly indicates that there would be a strong demand for eToro’s services.

Card Race Is Heating Up

Fintech companies are racing to develop their own virtual and physical debits cards. Their cards and associated checking accounts seek to enable users to purchase things with a card, smartphone, or online. The debit cards are connected to apps with new features that allow users to easily check their balance, monitor their purchases, and lock their accounts. The apps allow online and peer-to-peer payments by connecting physical debit cards. By developing smart debit cards, these companies have the opportunity to unlock new streams of data and revenue. They could charge interchange fees on purchases made with debit cards or other checking account fees and then split with their business partners.

Winklevoss Twins' Gemini and Archax Exchange Now Licensed by UK Financial Conduct Authority

The Financial Conduct Authority, the United Kingdom’s financial watchdog has granted licenses to two exchanges in the UK—Archax digital security exchange, as well as the Winklevoss twins’ Gemini exchange.

The UK’s Financial Conduct Authority (FCA) has granted two licenses according to their official website, one for Gemini and the other for Archax, which reportedly makes Archax the first regulated digital security exchange custodian and in the United Kingdom.

According to the FCA website, Archax and Gemini Europe Services were registered by the financial regulator on Aug. 18 and Aug. 19 respectively, after meeting the compliance standards of the authority.

The FCA implemented mandatory risk assessments for exchanges in January, to assess their compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.

Despite Kraken claiming to be the first licensed crypto exchange in the United Kingdom on July 6, their subsidiary Crypto Facilities has was only granted a Multilateral Trading Facility (MTF) license from the United Kingdom’s Financial Conduct Authority (FCA). Meaning that the UK Financial Conduct Authority’s decision has, in fact, made Archax the first regulated exchange and custodian in the UK, beating Gemini to the punch by a single day.

UK FCA Oversight on Crypto Advertising

As reported by Blockchain.News on July 21, the UK Treasury believes the lack of regulation around cryptocurrency and their associated financial products often leaves investors in the space without the same protections that are granted to retail investors, such as authoritative recourse and compensation.

The UK Government has proposed that crypto-asset promotions should fall under the scope of the Financial Conduct Authority’s existing oversight and does not require a whole new framework just for digital assets.

Economic Secretary to the Treasury & City Minister, John Glen said, “If adverts by unauthorized firms are misleading, or don’t fully outline the risks, then people can end up losing money. That’s why we want to put more protections in place around such financial promotions, including the promotion of crypto-assets while continuing to ensure people have access to a wide range of products on the market.”

The fastest solution being proposed is to immediately empower the FCA to begin regulating the promotion of digital asset and crypto investment products, as a way to combat misleading advertising.

UK FCA Regulator Proposes Mandatory AML Data Reports from Cryptocurrency Firms

The United Kingdom’s Financial Conduct Authority (FCA) has proposed an obligatory requirement for crypto exchanges in the UK to produce a report on anti-money laundering measures and data.

The UK’s Financial Conduct Authority (FCA) now wants crypto exchanges and crypto wallet custodians operating in the UK to provide more detailed information regarding money laundering risks.

The UK FCA regulator has put forward the proposal which is open to comment until November 23, 2020 and plans to publish a policy statement by the first quarter of 2021.

The FCA policy proposal published on Aug 25, is a plan by the UK financial regulator to impose obligatory AML reporting on digital asset firms and cryptocurrency wallet providers—a blanket-wide obligation for crypto exchanges large and small and “irrespective of their total annual revenue.”

FATF Recommends Extending AML Obligations to Crypto

In July 2016, the FCA introduced an annual financial crime reporting obligation for financial institutions on a range of indicators that reflect the potential money laundering risks of the firm services. The obligation to provide this financial crime information falls under the FCA’s Annual Financial Crime Report (REP-CRIM).

Based on the recommendations of the Financial Action Task Force (FATF)—an international body that sets global standards on combating money laundering and terrorist financing—the FCA now wants to extend the “the application of REP-CRIM to all firms we supervise.”

According to the proposal:

“We (FCA) consider that this approach will result in improving firms’ money laundering systems and controls, reduce actual risks of money laundering, and help improve the overall integrity of the UK financial system. It is also in line and builds on our data strategy, announced earlier this year, to use data and data analytics to transform the way we regulate and reduce the burden on firms.”

Under the new proposed rules, should they come into effect, crypto firms and cryptocurrency wallet custodians must provide information the FCA with information like the number of customers they serve in jurisdictions considered high risk and customers who refuse to comply and exit the services for suspicious reasons. This kind of AML information will be required by the FCA from crypto companies from their next “accounting reference date” after 10 January 2022.

The FCA also defined the term operates as “where the firm carries on its business or has a physical presence” as many cryptocurrency firms and custodians choose to register their business in tax haven territories such as the Cayman Islands.

UK FCA Grants First Crypto Licenses

As reported by Blockchain.News on August 21, the UK’s Financial Conduct Authority (FCA) has granted its first operating licenses for two crypto exchanges—one for Gemini and the other for Archax, officially making Archax the first regulated digital security exchange custodian and in the United Kingdom.

The FCA implemented mandatory risk assessments for exchanges in January, to assess their compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.

UK Treasury Drafting Private Stablecoin Regulations and Researching CBDC with BoE

The United Kingdom’s Treasury Department has announced it is drafting private stablecoin regulation while it continues central bank digital currency (CBDC) research alongside the Bank of England.

The UK Treasury has announced plans to regulate privately-issued digital currencies as well as continuing research into whether CBDC’s present a viable alternative to cash.

In the announcement on Nov.9, the Treasury’s Chancellor Rishi Sunak highlighted the incoming stablecoin regulatory proposals while discussing the new chapter in the United Kingdom’s financial services industry.

Rishi Sunak, Chancellor of the Exchequer, said:

“We are starting a new chapter in the history of financial services and renewing the UK’s position as the world’s pre-eminent financial centre […] New technologies such as stablecoins – privately-issued digital currencies – could transform the way people store and exchange their money, making payments cheaper and faster.”

Chancellor Sunak wants the UK’s financial industry to lead the global conversation and believes the Treasury’s “plans will ensure the UK moves forward as an open, attractive and well-regulated market.”

The draft offers little in terms of a concrete regulatory framework but mentions that the incoming draft guidelines will obligate stablecoins issuers to comply with the minimum standards placed open traditional payment entities in the country.

The announcement also reveals that both the Bank of England (BoE) and Her Majesty’s Treasury are currently researching a CBDC. Per the announcement:

“As the UK takes a leading role in the global conversation on Central Bank Digital Currencies, the Chancellor welcomed work by HM Treasury and the Bank of England to consider whether and how central banks can issue their own digital currencies as a complement to cash.”

Central Bank Digital Currency Race

Central banks around the world are competing to be the first to release their central bank digital currencies (CBDC) as the world economy is being reshaped by the challenges of the COVID-19 pandemic.

CBDC’s represent the digital form of a nation’s fiat money (currency backed by trust or faith in the regulating government). As such, it is controlled directly by the country’s central bank and is backed by national credit and government power.

Despite being influenced by decentralized cryptocurrencies like Bitcoin, CBDC is more of a reaction to than an embrace of cryptocurrency, which central banks see more as a threat to be managed.

With the immense popularity of Bitcoin and the announcement of the launch of Facebook’s Libra last year, governments are beginning to realize the importance of protecting against these threats to the existing banking and finance industry.

The European Union and its central bank have made consistent calls for the development of clear regulatory guidelines to foster private stablecoin developments—but concerns around the sovereignty of money still remain as well as protection for consumers.

Treasury Chancellor Rishi Sunak announced in a tweet earlier today:

“We’ll publish a consultation to ensure new privately-issued currencies, stablecoins, meet the high standards we expect of other payment methods […] And the Bank of England & Treasury are considering if central banks can issue their own digital currencies, as a complement to cash.”

Crypto Exchange CEX.IO Receives Temporary Registration Status with UK FCA

The UK Financial Conduct Authority (FCA) has granted crypto exchange CEX.IO a temporary registration status to operate until July 9, 2021.

Cryptocurrency exchange CEX.IO has been temporarily registered under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 as a cryptoasset business until July 9, 2021, pending the determination of its application by the FCA.

On December 16, 2020, the FCA announced that it has introduced a temporary registration regime for existing cryptoasset companies that applied for registration before December 16, 2020 and whose applications are still pending.

The regime was set up to ensure that existing businesses can continue to trade after January 2021 and until July 9. 2021, while the FCA reaches a decision regarding their applications.

Konstantin Anissimov, the Executive Director of CEX.IO, stated:

“As CEX.IO is among the companies that submitted their application for registration on time – until December 16, 2020 – we are obliged and expected to notify our clients and partners about our current temporary registration status by January 10, 2021. We are working very hard to achieve a full registration status with the FCA well ahead of the deadline of July 9. We will keep our users updated on any further developments in this field.”

While awaiting the finalization of its application with the FCA, CEX.IO will able to continue to provide cryptoasset-related services to its clients.

Crypto Firms Waiting

The FCA officially became the anti-money-laundering (AML) and counter-terrorist financing (CFT) watchdog for crypto companies in January 2020. The watchdog has now mandated that all new and existing crypto firms operating in the UK to register.

Under the FCA’s “temporary registration regime” more than 90 other applications still await approval to operate beyond July 9, 2021. CEX.IO will join Fidelity Digital Assets, B2C2, Bitstamp, Kraken-owned Crypto Facilities, and Galaxy Digital among others.

Three companies that have already made it to the FCA’s register are crypto payments app Ziglu and exchange operators Gemini and Archax.

UK Authorities Make Record-Breaking Crypto Seizure Worth Approximately $250 Million

UK detectives have seized cryptocurrencies worth nearly £180million, approximately $250 million. A 39-year-old woman was released on bail after under arrested. This seizure becomes the largest on British soil because it tops the £114 million, roughly $160 million, confiscation by the Metropolitan Police in June.

A 39-year-old woman suspected on suspicion of money laundering offences and was arrested on June 24. The woman later was interviewed under caution about the recent seizure. The police said the investigations are ongoing.

Graham McNulty, a deputy assistant commissioner, said:

“Proceeds of crime are laundered in many different ways. While cash remains king in the criminal world, as digital platforms develop, we’re increasingly seeing organised criminals using cryptocurrency to launder their dirty money.”

“Less than a month ago, we successfully seized £114million in cryptocurrency. Our investigation since then has been complex and wide-ranging. We have worked hard to trace this money and identify the criminality it may be linked to,” detective constable Joe Ryan added.

Organised criminals are eyeing cryptocurrencies

Relevant authorities across the globe are keeping a keen on the illegal use of cryptocurrencies. For instance, earlier this month, a former employee of New-Zealand based crypto exchange Cryptopia pleaded guilty to stealing over $171K in cryptocurrencies.

The defendant was accused of owning an unauthorised copy of private keys from Cryptopia’s numerous digital wallets, enabling him to hack various digital wallets and access over $100 million New Zealand dollars in Crypto.

Cryptopia was liquidated in 2019 after over $165K worth of crypto was hacked and stolen, representing 15% of its clients’ digital currency stock.

18% of Britons Own Crypto, Indicating an Exponential Growth in 2021, Study Shows

Almost one in five Britons (18%) own crypto, according to a survey conducted by cryptocurrency exchange Gemini.

Based on the findings, crypto ownership on British soil has been trending because research by the Financial Conduct Authority (FCA) in 2021 indicated that between 3.9% and 4.4% of Britons owned digital assets.

Blair Halliday, the head of Gemini in the United Kingdom, noted:

“2021 was transformational for UK cryptocurrency ownership. Confidence in and awareness of crypto has increased dramatically.”

The study interviewed 2,300 people in the United Kingdom, and nearly half of the respondents acknowledged that they invested in cryptocurrencies for the first time in 2021. Per the report:

“45% of Brits who owned crypto said they invested for the first time last year. It coincided with a rally for the market, with Bitcoin peaking at an all-time high above $68,000 in November.”

As the financial watchdog in the UK, the FCA might raise the alert about these findings because it has shown its reservation about investors entering the crypto space if they do not fully comprehend the risks.

Nevertheless, Halliday believes expanding people’s knowledge base about digital assets will play an instrumental role in enhancing adoption. He stated:

“We believe education is the key to enabling wider audiences to safely access and capitalize on the immense opportunities that crypto represents.”

Crypto adoption continues to gain steam across the globe. According to a recent study by Arcane Research and Ernst & Young (EY), 10% of Norwegian adults own crypto, double the rate recorded in 2018.

Furthermore, a poll by NBC News recently indicated that one in five Americans has used, traded, or invested in cryptocurrency, Blockchain.News reported.

Bitcoin Pumps to Mid-June Levels following Boris Johnson’s Resignation

Bitcoin (BTC) hit the $22K level, a scenario last seen in mid-June after Boris Johnson resigned as the UK prime minister.

Even though BTC had retraced to the $21,825 zone during intraday trading, the leading cryptocurrency was still up by 7.18% in the last 24 hours, according to CoinMarketCap.

Johnson resigned in a week marred by turmoil in British politics as various ministers quit based on a slew of scandals. Therefore, Johnson’s authority was eroded, which typically paralyzed the UK government.

Speaking to onlookers and supporters outside 10 Downing Street on Thursday, Johnson stated:

“It is clearly now the will of the parliamentary Conservative Party that there should be a new leader of that party and therefore a new prime minister.”

Nevertheless, he blamed the Conservative Party for his woes and said:

“As we have seen at Westminster … when the herd moves, it moves. And my friends, in politics, no one is remotely indispensable.”

Therefore, news about Johnson’s resignation has triggered a bullish momentum in the Bitcoin market because the top cryptocurrency has been struggling to hold the psychological price of $20,000.

However, a market analyst under the pseudonym Tajo Crypto believes caution should not be thrown to the wind because BTC is still not out of the woods. The analyst stated:

“Bitcoin pumped after Boris Johnson’s resignation and it’s pumping now, but let’s not be too optimistic and blow things out of proportion. We are still in a bear market and there’s no guarantee of leaving yet, especially with the Fed’s quantitative tightening. But anything is possible.”

With Bitcoin being rejected at the 200-day exponential moving average (EMA) at around $22.5K, time will tell how the leading cryptocurrency will play out in the short term.

Source: TradingView/LarkDavis

If the price goes back above the 200 EMA, a technical indicator, a reversal might have happened.

Meanwhile, Jordan Belfort, a former Wall Street stockbroker, recently stated that BTC investment required a long-term strategy based on underlying fundamentals.