The UK government is taking steps toward regulating cryptocurrency trading. In January 2018, it published a consultation paper proposing rules to regulate digital currency exchanges. This included proposals to set up a licensing system for exchanges; require firms to hold sufficient capital reserves; and impose restrictions on how much money can be moved out of the country.

In July 2018, the Financial Conduct Authority (FCA), the UK’s financial regulator, announced plans to launch a public inquiry into cryptoassets—a step taken because there had been no previous regulatory framework governing the sector.

As part of the FCA investigation, it has already received over 200 responses from companies involved in the market. A number of countries around the world have also introduced regulations surrounding cryptocurrencies.

UK investors should be aware of the risks associated with investing and trading in cryptocurrencies. They include volatility, fraud, hacking, theft, price manipulation, and lack of regulation.

There is a possibility that regulators might introduce legislation to control the cryptocurrency market. For example, China banned initial coin offerings (ICOs). South Korea recently adopted a law requiring ICO operators to register with local authorities.

Are cryptocurrencies regulated UK?

Crypto exchanges are required to comply with anti-money laundering (AML) laws. They must report suspicious transactions and keep records of customer identities. In addition, all crypto businesses operating in the United Kingdom need to register for antimoneylaundering permission.

There are many ways to check whether a crypto exchange is registered for AML. You can use the Financial Conduct Authority’s (FCA) database, which lists all companies authorised to operate in the financial sector. Another option is to contact the FCA directly.

Cryptocurrency Regulations UK – Exchanges

The United Kingdom’s Financial Conduct Authority (FCA) has announced new regulations for cryptocurrency exchanges. These are meant to protect consumers and ensure compliance with anti-money laundering and counter-terrorist financing laws. In addition, the FCA says it believes that the industry needs to become more transparent and accountable.

In January 2019, the FCA published a consultation paper about cryptocurrencies, asking whether virtual currencies should be treated as financial products or commodities. This decision could affect how much regulation applies to crypto exchanges.

The FCA says that some crypto exchange platforms have been operating without licenses. They have also failed to meet certain consumer protection requirements. As such, the regulator has imposed a number of new rules.

These include:

- All exchanges must now report suspicious activity to the National Crime Agency within 24 hours;

- All traders must provide identification documents;

- All exchanges must keep records of transactions for six months;

Are cryptocurrency investments taxed?

Investors in cryptocurrencies may need to consider whether they will be eligible for Capital Gains Tax relief. This could depend on the type of investment you make. If you buy into a cryptocurrency exchange, it might be considered a security. In this case, you would be liable to Capital Gains Tax. However, if you purchase Bitcoin directly from another investor, you would probably be exempt from paying tax on the gains.

People who invest in cryptocurrency should also consider whether they will be entitled to Capital Gains Tax relief when selling their holdings. This depends on what you bought the coins for and whether you sold them within three months of buying them. You should check HMRC’s guidance on this.

If you sell your coins for cash, you will generally be required to pay Income Tax on the profits you make. This applies regardless of whether you use fiat currency or cryptocurrency. Your employer needs to know about your crypto activities and ensure they comply with employment law.

You should keep track of your income and expenses relating to your crypto activity. You must declare any profits you earn above £10,200 per annum. Any losses incurred during the financial year will reduce your taxable income. You do not have to include the value of any crypto assets held in your accounts.

Crypto investors should also bear in mind that most exchanges operate outside the jurisdiction of the United Kingdom. Therefore, there is no guarantee that you can access the British courts to resolve disputes arising out of your dealings.

The EU approach

In February, the UK government published its response to the European Commission’s consultation paper on cryptocurrency regulation. The document called for a new regulatory framework to govern digital assets. The UK Treasury stressed that MiCA should be applied to all 27 EU member states.

MiCA applies to digital currencies, including those issued by central banks or security token issuers, such as shares or bonds. Cryptocurrencies are excluded from MiCA because they are not considered money. Instead, they fall under MiFID II, which governs financial instruments.

Crypto exchanges must register with the Financial Conduct Authority (FCA), if they want to offer trading services to retail investors. Exchanges that do not comply face fines up to 5% of global turnover.

MiCA does not apply to blockchain networks, decentralized cryptocurrencies, or initial coin offerings (ICOs). These products are governed by MiFID II, MiFIR, MiLTD, MiPSA, MiSAFE, MiTRACS, MiTMA, MiVAT, MiWEB, MiXBT, MiYORO, MiZEN, or MiZET.

The U.S. approach

In recent weeks, many countries have been exploring ways to regulate cryptocurrency. In the United States, the Securities and Exchange Commission (SEC) recently published a report on ICOs. The SEC stated that it believes there is no legal basis for cryptocurrencies such as Bitcoin or Ethereum because they do not fall under existing securities laws. However, the agency did say that it wants to collaborate with other agencies and regulators to develop rules for digital assets.

This will help avoid confusion among the different governments around the world. For example, China has banned initial coin offerings (ICOs), while South Korea is considering regulating them. Japan is still debating whether to ban cryptocurrencies altogether.

Summary

I hope this article has gave some light into the current situation regarding cryptocurrency regulations in the UK. I am sure that we will see more changes over the coming months and years as cryptocurrency is still fairly young in the grand scale of the financial world. If you have found this post helpful then consider sharing it with others who may find it useful. 

Thanks for reading 😀

FAQ

Are cryptocurrency exchanges regulated in the UK?

One area where you will find some regulation is when purchasing or trading cryptocurrencies through an exchange. Any cryptocurrency exchange providing its service to UK users must be registered with the FCA for money laundering.

Source: investingreviews.co.uk

What Should You Look for When Choosing a Crypto Exchange?

First and foremost, you'll want a secure exchange. As crypto has grown more popular and desirable, it's become an increasingly large target for hackers, and many leading exchanges, including Binance's international operation and KuCoin, have been hacked recently to the tune of tens of millions.

Source: forbes.com

Is Cryptocurrency Legal in the UK?

According to the Bank of England, since cryptocurrencies lack classical definitional characteristics, they are not considered ‘money' and do not pose a systemic risk to the stability of the banking ecosystem. However, because the legal consequences, regulations, and status of crypto assets and currencies can change depending on their nature, type, and usage, the Financial Conduct Authority (FCA) and the Bank of England have issued a range of warnings and guidance about the use of cryptocurrency in the UK. Those warnings concern the absence of regulatory and monetary protection, the status of cryptocurrencies as stores of value, and on the dangers of speculative trading and volatility.

Source: complyadvantage.com