Legal aspects of the UK cryptocurrency market

When buying and selling cryptocurrency, it is important to understand the legal side of the process.

How to buy cryptocurrency in UK?

• Coinbase is one of the largest digital money exchanges on the Internet, where you can buy and sell Bitcoin, LiteCoin, and Ethereum. Coinbase - it's more than 22 million active wallets and user-friendly English-language interface;

• Bittylicious.com - a site created specifically for UK residents, supports Barclays Pingit and Paym systems;
• Coinfloor - the most popular currency exchange in the United Kingdom, here you can use GBP to replenish accounts and buy cryptocurrency;
• Kraken is one of the most popular cryptocurrency exchanges in the world, it offers customers more than 150 types of tokens, and here you can replenish your account with fiat, including pounds sterling.

There is no legislative regulation of trading with Bitcoins and other cryptocurrencies in the UK. This is due to the fact that government has not developed a unified opinion on this matter yet.

Even bitcoin legal status is not defined: it is not recognized as a monetary instrument, a debt obligation, or a security. Because of this deals with bitcoins and other tokens that are conducted in the United Kingdom, are still in a "legal vacuum".

Participation in ICOs

Residents of the UK can participate in promising crowdsales of new projects' tokens. ICO investors pay back their investments in 2-3 months after listing of new cryptocurrency on exchanges, and their annual income can reach 500-700% of the investments made.

ICOs are not regulated by UK laws at the moment. At various times, cryptocurrencies were studied out by the Ministry of Finance of the United Kingdom and the National Agency for Combating Crime. They came to the conclusion that the risk of terrorists obtaining cryptocurrency financing is low. So regulators did not see any reason to introduce a rigid regulation of crypto and ICOs.

However, in October 2017, the FCA (Financial Conduct Authority, UK Financial Regulation, and Regulation Authority) issued a statement that some ICOs conducted in the country should be regulated. However, the list of crowdsales that should fall under the legal regulations has not been published yet. And there is no understanding of how to classify Initial Coin Offering at all.

Taxation

Her Majesty's Revenue and Customs determines cryptocurrency taxation in the United Kingdom.

The amount of the taxable base depends on whether the ICO organiser is a resident of the United Kingdom:

• if the company that holds the ICO is registered in the UK. then it pays tax on all profits;
• if the company is not UK-based, then only the profit that was received when selling tokens to UK residents is used to calculate the tax.

In the United Kingdom, several types of taxes are applied to operations with cryptocurrencies:

• income tax, 19-20% - by default, all operations related to cryptocurrencies are taxed, and it is paid by both individuals and companies;
• VAT, 20% - is not charged on the profit received as a result of cryptocurrency mining as well as on income from exchanging tokens for fiat.

In addition, HMRC states that in some cases companies working with cryptocurrencies must pay Capital Gains Tax. It is 19-20%.

Use in everyday life

The main sphere of cryptocurrency application in everyday life is payments. You can pay in bitcoins for goods and services in following companies in the UK:

• Microsoft;
• Dell;
• Expedia (ticket booking service);
• airBaltic;
• newegg.com (IT hardware company).
• Scan UK (one of the largest computer stores)

Purchases of goods and services for cryptocurrency are not legally regulated in the UK.

Summary

In general, cryptocurrency legal regulation in the United Kingdom in hang up in the air. Regulators do not seek to come to an agreement on what is cryptocurrency and issue relevant laws.

However, we can not say that the UK government is "anti-crypto". For example, Financial Conduct Authority launched the Innovation Hub project. It is intended for organizers of cryptocurrency start-ups. The project's goal is to provide comprehensive legal advice, taking into account the specifics of particular cryptocurrency developments or ICOs.

It is likely that in the next 1-2 years, the UK government will introduce special regulation of all operations related to digital money. However, as long as this does not happen, many aspects of the cryptocurrency activity in the United Kingdom remain within the legal "gray zone". They are not mentioned in any way in existing laws, and regulators prefer not to pay attention to them.