Are Cryptocurrencies Legal in the UK?
In this post, we will explore the legalization and restrictions that the UK government had put in place to control the use of cryptocurrencies. Read till the end to know the best exchanges you can use when buying or selling crypto in the UK.
Who regulates digital assets in the UK?
The Financial Conduct Authority (FCA), established in 2013, is responsible for controlling financial markets, including crypto in the UK. The FCA is part of the United Kingdom Cryptoassets Taskforce and has the following mandates:
• Manage the marketing of financial products and services
• Ban unfit financial products or assets
• Investigate entities affiliated with a certain digital asset
Are cryptocurrencies in the UK legal?
The relevant regulatory authorities in the UK allow people to buy and sell cryptocurrencies freely. However, there is a ban on cryptocurrency derivatives that we’ll discuss later in this guide. Let’s first understand some of the legalities set to control cryptos.
Cryptocurrency Legalities in the UK
- Despite crypto-assets being regarded as property in 2020, they are still not recognized as legal tender.
- Virtual Assets Service Providers (VASPs) must apply to FCA to be licensed unless they have applied for an e-money licence.
- VASPs must also adhere to other compliance rules such as the Anti Money Laundering (AML), Know Your Customer (KYC) and Combating the Financing of Terrorism (CFT).
- Crypto taxes are different between individuals and businesses and depend on the kind of assets being transacted.
- The crypto-asset task force recognizes 8 distinct actors in the market as follows:
• Cryptocurrency developers and issuers- Design and issue crypto-assets for themselves and on behalf of other agencies.
• Investors in the crypto-assets market- These are individuals or institutions that want to invest in crypto.
• Financial intermediaries- Players such as brokers that facilitate easier purchasing of crypto assets.
• Miners- These are people who verify cryptocurrency puzzles representing transactions to earn rewards.
• Trading platforms and exchanges- Facilitate crypto transactions between participants.
• Liquidity providers- These are professionals in the market making process.
• Payments and merchant providers- Channels that enable customers to pay merchants with crypto assets
• Wallet and custody service providers- Facilitate safe storage of crypto-assets.
The Ban on Crypto Derivatives
The FCA recently banned the offering of crypto derivatives products to UK retail users due to fear that they could negatively affect crypto retail customers in the UK. Here are other reasons that led to this ban:
• The intrinsic nature of these assets that make it hard to calculate values
• Increased criminal and abuse cases in the secondary market
• High volatility in digital assets price fluctuations
• Crypto retail customers lacking enough understanding of secondary cryptocurrencies
• Lack of viable reasons by retail customers to invest in digital assets
Although cryptocurrencies are not yet regarded as legal tender in the UK, there is so much in store for this industry in the near future. At least for now, there is a solid task force working to find how cryptocurrencies should be regulated in this region. If you would like to invest in cryptocurrencies in the UK, go for the main offerings such as Bitcoin and invest in reputable exchange such as Coinbase. Don’t forget to store your cryptocurrency safely in a private wallet.