The British government’s approach to digital currency legislation has been outlined, but it became more mature after the UK withdrew from the EU. Although the UK designated digital currencies as proprietary in 2020, there are no specific rules for them, and they are not legal tender.
According to the Bank of Britain, since digital currencies lack the characteristics of the classical definition, they cannot be considered “money” and do not pose a particular systematic risk to the stability of the banking ecosystem. But with legal implications, legislation, and the volatile nature of digital currencies that depend on their type and application, the UK Financial Strategy Authority (FCA) and the Bank of England have issued numerous warnings and instructions. These warnings refer to issues such as lack of regulation and financial support, the status of digital currencies as reserves of value, instability, and the risks of speculative trading.
Uncertainty over digital currency legislation has prompted the British government to set up a task force in 2018.
Digital currency legislation in the UK allows users to buy and sell digital currencies. Still, digital currency derivatives market trading is prohibited due to recent regulatory action and UK financial regulation by the Financial Strategy Authority (FCA).
To stifle innovation and maintain the integrity of the more comprehensive financial system in the UK, Virtual Asset Service Providers (VASP) laws have been enacted. Cryptocurrency exchanges need to be registered with the Financial Strategies Authority (FCA) to operate in the UK; Unless they have applied for an e-money license. In addition, they must comply with applicable laws, including KYC, Anti-Money Laundering (AML) and Anti-Terrorist Financing (CFT) laws.
As the variety of business models, institutions and entities in the field of Cryptocurrencies is growing and constantly expanding, the UK Financial Strategies Authority (FCA), the Bank of Britain and Her Highness the Treasury (HM Treasury), in 2018, jointly established a particular working group to schedule and regulated digital currencies. Among the tasks of this specific working group can be mentioned the following:
The Financial Strategies Authority (FCA) was established on January 10, 2020, to oversee digital currency businesses’ activities to combat money laundering and counter-terrorism financing. In July 2019, the organization published a handbook on how to combat money laundering and terrorist financing through digital currencies in a manual entitled “PS19 / 22: Guidance on Digital Assets.” All institutions and entities must follow the instructions in this book:
In addition to the UK Anti-Money Laundering Headquarters requirements, the KYC status and customer authentication (CDD) conditions, such as the user’s legal name, valid photo and residence documents, need to be checked. These requirements are set out in the Money Laundering and Terrorist Financing and Transfer Funding Regulations (Payer Information) published in 2017.
Exchanges in the UK are subject to registration rules. Although it left the European Union in 2020, the UK has already transposed digital currency legislation requirements from the Fifth and Sixth Anti-Money Laundering Directives (5AMLD, 6AMLD) into domestic law. As of January 10, 2021, all digital asset companies in the UK (including reputable exchanges, consultants, investment managers and professionals) based in the UK or a business providing services to UK-based clients must register with the Financial Strategy Reference (FCA).
Critically, these businesses must comply with Anti-Money Laundering and Anti-Terrorist Financing (AML / CFT) reports and customer protection commitments. The Financial Strategies Reference Guidelines emphasize that individuals and entities involved in digital asset activities must comply with the Money Laundering, Terrorist Financing, and Transfer of Payers Act (MLRs) enacted in 2017 (MLRs).
The Financial Strategies Authority has warned that digital currency businesses that have not submitted or withdrawn their registration application by December 15, 2020, must complete all digital currency-related activities by January 10 (21st). D) stop.
In an email to these companies, the regulator wrote that businesses should carefully consider all relevant issues and, if possible, return any money or digital assets that fall within the scope of anti-money laundering laws. The text of this email is as follows: “Any business currently operating in the field of digital assets under the scope of the UK Anti-Money Laundering Act must have completed anti-money laundering and counter-terrorism financing processes by January 9, 2021, and be legally authorized by the UK Financial Strategies Authority. “If you are one of the businesses in the UK that are still doing digital asset activities and fall into any of the above categories, you should stop doing so before January 10, 2021.”
The amendments to the legislation came into force in January 2020 and included the latest FATF guidelines. Following the licensing requirements for digital currency businesses, many businesses submitted their applications for registration in the Financial Strategies Reference. In December 2020, due to infrastructural problems in the digital currency business registration process, the Financial Strategies Authority could not process all registration applications and launched the “Temporary Registration System.” This temporary system postponed the registration deadline from July 9, 2021 (July 18, 1400) to March 31, 2022.
It should be noted that the requirements for digital currency licensing by the UK Financial Strategy Authority have not been so simple. In late 2020, the organization announced that trading in digital currency derivatives (such as the futures market) would be banned from January 6, 2021 (January 6, 2016) to protect users from market fluctuations. Also, according to the British Financial Strategies Authority, Binance Exchange is not allowed to operate in this country. The agency has continued Bainance’s operations in the UK conditional on obtaining the necessary permits. In June 2021, the UK Financial Strategies Authority (FCA) announced in a statement, citing Binance Markets Limited, that the company had no right to engage in any regulatory activity without its approval.
In 2021, the Financial Strategies Authority (FCA) banned the provision of digital currency derivatives services (such as secondary trading and futures) to UK retailers because of the inherent risks involved. The reason for the ban by the Financial Strategies Authority (FCA) is as follows: Digital assets lack a reliable measure of intrinsic value, Possibility of misuse of digital currencies and crimes in secondary markets (such as Darkount), Severe price fluctuations in the digital currency market, Retailers have an insufficient understanding of the Cryptocurrency market, and Retailers have no good reason to invest in virtual assets.
The Mining of Cryptocurrencies is legal in the UK, and there is no specific legislation on this activity. It is unlikely to fall within the scope of financial regulations in the UK. Are ATMs allowed in the UK? Bitcoin ATMs are allowed in the UK subject to regulation and licensing by the Financial Strategies Authority. There are now more than 250 ATMs in the UK for buying digital currencies. The UK has the most significant number of digital currency ATMs compared to European countries.
According to the central bank, Britain does not currently have a national digital currency, but we will soon see the country’s release of a national digital currency. On July 13, 2020, the Bank of the United Kingdom announced that the Bank of England was examining various aspects of the country’s national digital currency supply. The Bank of Britain is one of several central banks worldwide considering creating a digital version of their national currency.In early 2020, Bank of
England Banking Director of Banking Remittances said research on digital currencies was “vital” for central banks. His remarks were made about private institutions competing with the central bank to create cryptocurrencies.
The head of the Bank of England believes that a digital currency that is “sustainable” has not yet been introduced. He cites the stabilization of coins and national digital currencies as “sustainable solutions” in this area.
Her Majesty’s Revenue and Customs (HMRC), a UK non-ministerial tax collector, has published a brief overview of how digital currency taxes are paid, stating that digital currencies have a “unique identity.” It means that they are not comparable to ordinary investments and payments, and their “taxability” depends on the activities of the parties concerned. Gains or losses on digital currencies are subject to capital gains tax (CGT). Digital currency taxes in the UK vary between individuals and businesses.
The usual capital tax is calculated depending on the amount of profit and loss of the individual. It also includes other activities of people in this field, such as extraction, sticking, etc.
Enter your information for better communication
How can i help you?
Please enter the form information