UK Crypto – The Future Global Market

So far, the UK has taken cautionary steps in regulating cryptocurrencies. Currently, crypto is largely unregulated, though some regulations apply.

Crypto exchanges and brokers must register with the Financial Conduct Authority (FCA) and follow “know your customer” rules. The FCA has also issued warnings about crypto scams and price volatility risks.

HMRC has clarified that crypto assets are “taxable commodities,” meaning capital gains tax and other taxes apply to crypto profits and transactions. However, crypto is not classed as a currency or money. More, the Bank of England monitors crypto markets but does not regulate crypto assets directly.

The Financial Conduct Authority regulates crypto assets in the UK to protect investors and ensure market integrity.

The FCA classifies crypto assets into three types:

• Exchange tokens; like Bitcoin and Etherium, are decentralized and used primarily as a means of exchange.
• Utility tokens; that provide access to a service or product.
• Security tokens; that offer equity or debt in a business.

Exchange and utility tokens are outside the regulatory scope, meaning the FCA does not regulate them directly. Security tokens are fully regulated since they have the features of traditional financial instruments like shares or bonds. Issuers must comply with financial promotion rules and may need to register with the FCA. The FCA also regulates crypto asset businesses like exchanges, trading platforms, and wallet providers.

While the crypto sector is largely unregulated, the FCA is taking a balanced approach. Now thanks to Brexit, the UK has more freedom to determine how it wants to regulate cryptocurrencies and blockchain technology.

Post-Brexit, officials may push for more lenient crypto policies and tax laws to bring more crypto companies and jobs into the country. Both the US and UK have shown interest in cryptocurrency and blockchain, launching official task forces to explore their potential.

After tremendous research on CBDCs, the Bank of England believes that enhancing the payment infrastructure is possible. The Bank of England will likely proceed gradually, introducing a CBDC for interbank wholesale payments.

A general-purpose retail CBDC is still years away and would require legislations to come into play. Stable, well-regulated digital currencies may eventually transform how people and businesses transact value daily. But the UK will move carefully to ensure its financial system remains sound and consumers stay protected.

While crypto is still a wild west show, the UK government and regulators seem keen to encourage innovation while protecting investors and clamping down on malicious activities.

More regulation means something other than the end of opportunity in the UK’s crypto space. Investors and businesses willing to follow best practices and work with regulators could find increased legitimacy and access to mainstream customers. The future of crypto regulation in the UK remains uncertain but promising.