The unprecedented appreciation of cryptocurrency gains over the past year has taken the world by storm. Cryptocurrency exchanges have also seen massive gains due to the cryptocurrency trading boom of 2021. Needless to say, this surge has caught the attention of regulators. It is understandable that many governments are considering taxing cryptocurrency platforms.
Digital tax raid
At press time, UK regulators had launched a new tax-related structure for exchanges here in the region. According to a report by The Telegraph, digital asset platforms have suffered a major “digital tax” blow. According to the announcement, cryptocurrencies are not currencies or commodities. The regulator stated,
“They do not qualify for an exemption granted to financial markets … Her Majesty’s Revenue and Customs office (HMRC) does not recognize cryptocurrencies as financial instruments.”
The tweet below highlights the same,
#Bitcoin Exchanges have been dragged into the Treasury’s technology tax after HMRC said they would not qualify for an exemption granted to financial services companies.@jamestitcomb reports https://t.co/ywPBYFim2t pic.twitter.com/dK7GXzTbUl
– Telegraph Business (@telebusiness) November 28, 2021
Quite a setback.
However, it will be included in the tax on digital services that was implemented last year in April. The statement also noted,
“Starting April 1, 2020, the government will introduce a new 2% tax on revenue from search engines, social media services and online marketplaces that derive value from UK users.”
HMRC also updated its guide on taxes for digital services and stated:
“There are many crypto assets, each of which has different characteristics. Since cryptocurrencies do not represent money, commodities or financial contracts, it is unlikely that exchanges of cryptocurrency assets will be able to benefit from the exemption for online financial markets. “
The timing of this news comes after a G20 Tax Accord earlier in the year to punish tax evasion.
Coinbase, arguably one of the largest exchanges in the world, would be affected like other major exchanges in London. Consider this: According to the report, Coinbase UK is expected to easily exceed the income threshold of £ 25 million ($ 33 million). This would mean higher fees for those who buy and sell cryptocurrencies.
Needless to say, many have raised concerns as soon as the news broke.
Cryptocurrencies in the UK have been the center of attraction for a while now. UK Financial Conduct Authority (FCA) has also been tightening its regulatory position lately. He reportedly spent around $ 671,000 hiring consultants from a blockchain analytics firm to combat cryptocurrency-related crime.
However, this is not something new. Other countries like South Korea have also implemented similar tax regimes. In fact, some hope that other regions will soon follow suit.
This is a machine translation of our English version.