A few years ago, the UK announced plans to develop itself into a hub for cryptocurrency. Naturally, this can only be done if there are favourable crypto-related regulations in place, especially when it comes to online payments. We’ve seen many cases where a single piece of regulation can make or break the industry in various countries, so all eyes are on the UK’s crypto regulations.
But what is the current state of these laws? The UK has introduced comprehensive crypto laws over the last few years that set the scene for what might be to come.
Crypto Tax Laws
One of the most important sets of crypto laws is those relating to digital asset taxation. In the UK, cryptocurrency is taxed when it is earned or when it is traded. If any individual is paid in cryptocurrency, they have to pay tax on it depending on what band they fall into. Taxes could range from 0% to 45% depending on how much crypto they have been paid and where in the UK they live.
If an individual trades cryptocurrency, they have to pay capital gains tax on it if they cross the annual tax-free allowance of £12,300. Above this rate, investors will need to pay a 10% tax on whatever gains are made on the tokens or 20% on higher tax bands. If the investor made a loss on their trade, their capital gains tax can be released. It should also be noted that if investors trade beyond a certain amount of money, they will be classed as professional traders and pay income tax.
Crypto Gambling Laws
Gambling with cryptocurrency has been popular for several years now within the UK and existing laws accommodate this to a degree. Currently, there is no specific law governing crypto gambling, but online gambling is legal within the UK, provided that the site is duly registered with the authorities. Additionally, if the payment methods supported by a site change at any point (including new support of cryptocurrency), a report must be made to the UK’s Gambling Commission to notify them.
Just like with online payments as a whole, cryptocurrency use for gambling is not restricted by the law and this has seen the practice grow over time. In fact, some of the best bitcoin casinos in the UK were created specifically with cryptocurrency in mind and not as an add-on for an existing traditional casino. UK consumers are known to use both home-grown casinos and those based outside of the UK, many of which also accept cryptocurrency as payment.
In the last year, there have been calls to declare crypto trading as gambling within the UK, but these have been rejected by regulators. If anything, we can expect both crypto trading and crypto gambling to retain their popularity.
Recognition of Online Crypto Payments
In the UK, crypto payments are legally allowed, though cryptos themselves are not considered legal tender. Any companies that deal in cryptocurrency payments or offer crypto services in the UK are required to register with the Financial Conduct Authority (FCA). As part of registration, these companies are required to have both anti-money laundering (AML) and terrorist financing procedures in place.
Within the country, several firms accept cryptocurrency as a means of payment for both goods and services, though there has been some friction on the part of financial institutions. Several banks have been known to restrict the use of their cards and accounts for crypto-related transactions and some have outright banned them. And while many crypto firms are registered with the FCA, crypto investments are not covered by consumer protection agencies in the UK.
Another development in the crypto space within the UK was the passage of the Travel Rule. This means that from 1 September 2023, businesses that deal in crypto assets would be required to collect, verify and share information about crypto asset transfers that they facilitate. The idea behind this law was that mandatory reporting would make it harder for nefarious characters to use cryptocurrency as a way to finance their activities. Along with enforcing the Travel Rule within its own borders, the UK has also encouraged other countries to implement similar restrictions. On top of this, crypto asset dealers have the discretion to decide whether or not to authorise transactions between UK-based customers and those in countries without the travel rule.
Other steps highlighted by the FCA to promote compliance among crypto firms include making a registration; ongoing risk assessments; maintenance of appropriate policies; controls and procedures; staff training; customer due diligence; record keeping; and reporting. Crypto laws in the UK regarding safety and consumer protection have been notably tightened in the last year, which many see as a response to the high-profile industry scandals of 2022, including the collapse of Terra and FTX.
Conclusion
The UK, like many countries around the world, is actively trying to become the next big crypto hub. This desire is evident in its current crypto regulations, which cover everything from taxes to online payments. Within the UK, there is an existing setup for taxing crypto trades and regulating the businesses that are allowed to operate in the space. As crypto gambling continues to take off, both the consumers and the operators of these businesses are given legal protections and a framework to make sure they are on the right side of the law.
