The UK is going to update its crypto laws

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There are a lot of changes in the financial market since the past year as it was the year of major changes. The global covid pandemic affected lives in many different ways and there were not left any of the fields on which it did not have its influence. When major world events happen, usually the global economy is the one which is affected in every case. After people were stuck at home and a lot of them lost their jobs not only in one country but all over the world, they started thinking about the alternative in order to gain and generate their profits. Crypto-industry appeared to be ready to accomplish its wish and offer them additional benefits in this tough time. This is when and why the thrive of cryptocurrencies started. It is true that if before that time, majorly those who were having ties with the financial markets were aware of how crypto-industry was working, but after the lockdown, since everyone had a lot of free time, more and more people became interested in this field and tried to get as much information as possible. However, if you had decided to become involved in trading or investing with cryptocurrencies, you had to find out what was the regulations in your country, if it was not formulated yet, then what was the expectations, as many countries have the experience of changing the crypto-related laws not only once, but several times. Every country has its own specific attitudes toward it and the UK is not an expectation in this case too. The article will review the general regulations and crypto-environment in the UK and new upcoming laws that are doomed to change the attitude towards it.

UK Crypto Regulations

The general law on cryptocurrencies in the UK was that the citizens were allowed to buy and sell cryptocurrencies but recent actions taken by the Financial Conduct Authority (FCA) are going to ban the trading of cryptocurrency derivatives. There are some key takeaways regarding the regulations on cryptocurrencies in the UK. First and foremost, they are not considered legal tender, taxes based on activities, entities & tokens, there are bans on derivatives offering, etc.

In order to operate on the UK market, crypto exchanges have to register with the FCA, or you should have an e-money license. In order to make it clear for the public and those who are providing with these services, what is the rule, the UK’s FCA, Bank of England, and HM Treasury mutually verified the ‘Crypto Assets Task Force’ in 2018, which sought to determine when and how crypto-assets should be regulated. All this happening in order to establish a name of transparency while conducting the financial operations, ensure the standards that are high-regulatory and protect clients, and enable risk takers/innovators in the industry that play by the rules to thrive. Moreover, there are also bitcoin ATMs that are legal in case they are regulated by the FCA.

At the beginning of 2021, the UK’s FCA decided to ban the offering of crypto derivatives due to numerous reasons, one of them being inherent risks that might affect the safety of the clients. Those thoughts were mainly coming from the practice when a lot of people became involved in scamming from the firms, that were not even regulated and made people believe that their involvement in the market would make them enriched. It also affected the entertainment industry, as modern blockchain technology is giving the possibility to use its advantages in many different ways, as a result, crypto gambling in the UK was massively increased. It was due to its efficiency and process was very simple and enjoyable for those who started to try themselves in this regard, let alone professional players who were given the best opportunity to gamble without even going out and making the process even more convenient in this covid era.

Tax authority publishing new guidance

It is already officially announced that on March 30, 2021, the UK government is going to announce the new guidance on taxation, which is believed to be safe guidance on interest earned through lending crypto and staking and expected to be updated several times in the following year. Soon the published guidance will be “a new internal manual” containing guidance on crypto tax, in order to provide clarity to the clients that will help the individuals or businesses to better understand the tax requirements and consequences on different types of crypto transactions.

It is expected to have a major influence on one specific area, which is defi decentralized finance, DeFi, which space has grown from $650 million to $40 billion during the last year.

Conclusion

Finally, to sum up, the beginning of 2021 is a period of new rules or laws regarding crypto-exchange as 2020 made the market immense and the prices on the coins increased drastically, at the same time its popularity has already reached its peak. Other than the profits and advantages that this industry has, due to its nature that it is impossible to control or track it because of the blockchain system, this industry was often used for money laundering and to make illegal actions. Because of these illegal actions, many people were losing their money because all those companies reached out to them, promising extra income and gains and during this global economic crisis, they became very vulnerable towards this suggestion. If some of the countries are trying to implement cryptocurrencies as a payment method, some of them are trying to make it regulated. One of the major markets in Africa, Nigeria, and South Africa is planning to do the same and impose regulations not to hinder the development of the crypto-market but to ensure the safety of the clients. This is the bottom line of the decision of the UK’s government to make it clear to the public what it really means to be involved in the market and what would be the tax requirements. It will affect the demand market a lot, as the percentage of taxation is expected to be high.