Despite this trend and the ongoing consultations up until now, the UK hadn’t had much of a regulatory framework when it came to these digital assets. However, on the 4th April, the government announced their plan to make the UK “a global cryptoasset technology hub”. Given this announcement was sandwiched between the Spring Statement and new tax year, you could have been forgiven for missing this one, so to summarise:
What’s the government’s ambition?
This announcement is intended to be the first phase of a series of measures to improve the UK’s standing as a hub for cryptoassets to compete with the likes of Switzerland. Rishi Sunak, Chancellor of the Exchequer, stated:
- “it’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country”
- “We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term”
- “This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation”.
What does the plan entail?
The main points within this plan are as follows:
- Stablecoins (cryptocurrencies with prices pegged to traditional currencies or commodities) will be bought within regulation so that they can be accepted as a recognised form of payment within the UK. This is with a view to providing both an environment where stablecoin issuers and service providers can operate and grow in the UK but also providing consumer confidence for stablecoin payment services.
- A ‘financial market infrastructure (FMI) sandbox’ will be introduced to allow firms to innovate and experiment within this space. In particular, the government’s view is this sandbox will allow firms to test Distributed Ledger Technology.
- A ‘Cryptoasset Engagement Group’ will be established with industry experts to advise the government on key issues facing the sector. Further to this, two ‘Crypto Sprints’ have been arranged by the FCA to discuss specific challenges from a regulatory standpoint.
- The government is currently working with the Royal Mint on an NFT to be released later this summer as a statement of “the forward-looking approach the UK is determined to take” with cryptoassets.
- Finally, the measure states they will explore ways of enhancing the competitiveness of the UK tax system to encourage further development of the crypto market. Specifically, this measure will review how DeFi loans are treated from a tax perspective and will consult on extending the scope of the Investment Manager Exemption to include cryptoassets.
What does the future hold for the UK’s crypto industry?
In John Glen’s, the Economic Secretary, keynote speech at the Innovate Finance Global Summit delivered the same day of the announcement, he stated:
“So what does the future of crypto here in the UK look like? No-one knows for sure. But we think by making this country a hospitable place for crypto we can attract investment, generate swathes of new jobs and create a wave of ground-breaking new products and services.”
So whilst many would argue we need better regulation and clearer tax guidance to catch up with other crypto hubs, this announcement will at least be welcomed by many as a step in the right direction.
Need support with crypto taxes?
At UHY, we’re able to support our clients with their cryptoassets, from ongoing support and tax advice, to software to help with portfolio tracking and personal tax returns. For more information on this, please contact James Foster on j.foster@uhy-uk.com or your usual UHY advisor.
