Cryptocurrencies: Not legal tender
Cryptocurrency exchanges: Legal, registration requirements with FCA
The United Kingdom’s approach to cryptocurrency regulations has been measured: although the UK has no specific cryptocurrency laws, cryptocurrencies are not considered legal tender and exchanges have registration requirements. HMRC has issued a brief on the tax treatment of cryptocurrencies, stating that their “unique identity” means they can’t be compared to conventional investments or payments, and their “taxability” depends on the activities and parties involved. Gains or losses on cryptocurrencies are, however, subject to capital gains tax.
Cryptocurrency exchanges in the UK generally need to register with the Financial Conduct Authority (FCA) – although some crypto businesses may be able to obtain an e-license, instead. Although it doesn’t make special provisions for exchanges, FCA guidance stresses that entities engaging in crypto-related activities which fall under existing financial regulations for derivatives (like futures and options) require authorization.
In 2018, Bank of England Governor, Mark Carney, revealed that targeted cryptocurrency regulations for the UK are on the horizon. With a parliamentary inquiry ongoing, the FCA is working with the BOE and the UK Treasury to develop a strategy for dealing with cryptocurrency risks – specifically focusing on AML/CFT, and financial stability. The FCA will reveal new cryptocurrency guidelines in late 2018.