Cryptocurrency in the U.K. is a fragmented story, earlier the Financial Conduct Authority had a limited remit to access in the industry, but from the beginning of 2020, it has come into the force directly. Being responsible for monitoring the crypto business, FCA now ensures the proper implementation of measures related to sensitive issues such as anti-money laundering and counter-terrorist financing. However, the authority is not answerable for the exchange’s behavior with their customers and client funding if they are inadequately protected.
FCA is a step forward in warning investors about dealing with digital currencies, as it states, “very high risk, speculative purchases.” The regulators want to inform the nature of the marketplace, which is a constant target of scammers and fraudsters. Today, the U.K. is working on the three most vital aspects in the development of the Crypto ecosystem which includes;
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The leniency of U.K. Cryptocurrency regulation in the U.K. is all set to change.
As FCA conducts financial business in the U.K., the first action is taken to raise questions against leading cryptocurrencies such as bitcoin, litecoin, and ethereum due to its intangibility and historical volatility. Meanwhile, digital assets become mainstream, leading FCA to plan comprehensive regulations to protect impending investors. For the organization, the cryptocurrencies are not backed up by any resourceful currency or authentic assets, doubling the complications in making a tough decision. According to the source, Although exchanges must register with the FCA, crypto assets are not currently regulated according to the country’s most recent guidance.” — FCA.
As of now, the U.K. doesn’t hold a strong perspective in circulating regulations on cryptocurrencies and is far away in recognizing both the risk and potential of trading with digital assets. Cryptocurrencies are meant to be decentralized and anonymous, which simply represents inherent regulatory hurdles with the system. In the end, the U.K. government arm is still responsible for activities related to tax collection while subjecting crypto exchanges to one or the other form of taxation.
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U.K. Tax Authority constantly checks on Crypto activities
Being the fastest growing industry, cryptocurrency regulators of the U.K. are fully involved in planning and implementing new legislation quickly. What matters the most is the taxation guidance! As earlier, according to HMRC, cryptocurrency trading was equal to gambling, but in the new guidelines, the agency defies the statement regarding the trading of crypto assets.
Now the HMRC’s scope to recognize the crypto assets’ legitimacy will bring out the effective tax plans, and repositioning the regulations can be seen as some level of validation for the crypto market to grow in the U.K. Moreover, with the market evolution, the cryptocurrency will be evaluated under the trader’s tax liability and move according to the latest market shifts. For consumers, the changes are required to be followed as per the new regulations.
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The U.K. financial watchdog actively participates in controlling crypto investigations.
Amidst the myriad layers of risk and benefits of crypto business, the main focus of protecting individual clients sustains to maintain the market’s integrity. These days regulators of the entire world are subjected to execute measures against money laundering, which is the foremost concern. Also, for the U.K., crypto frauds have drawn huge attention from the government bodies after the staggering statistics depicted in last year’s annual assessment.
In 2019, the crypto investigations surged up to 74% against the previous year. In an FCA report, around $34 million were lost by the investors due to high-level scams held between 2018-2019. Today, the U.K. regulatory bodies have ramped up the investigations on crypto tradings and come up with a strategic plan shortly for financial stability by the end of 2020.
What can happen with the new U.K. Cryptocurrency Regulation?
If FCA acclaims the unregulated U.K. crypto market for a long time, there will be a rise in the economic tension, leaving consumers vulnerable. Also, the scenario of over-regulation creates chaos and shackles the market entirely. In 2020 policies, the U.K. government needs to work accordingly with FCA to enact suitable and strong regulatory policies to govern the market scales. Whereas, U.K. traders are expected to join the club of trusted exchanges that offers tailored services among the region.
Recently in the 2020 budget, however, the government has shown some positive signals while announcing the upcoming plans to introduce certain crypto-assets into the main front concerning financial promotions regulations. Intending to consult on the broader regulatory approach to crypto-assets, the U.K. government has given the slight hint of adding stable coins into the plans.