The United Kingdom’s tax-collecting Her Majesty’s Revenue and Customs (HMRC) has said that crypto platforms will be subject to a 2% tax as part of the digital services tax scheme. Pro-cryptocurrency groups are already lobbying against the law.
The United Kingdom’s Her Majesty’s Revenue and Customs (HMRC), a non-ministerial department that handles tax collection, has said that crypto exchanges would fall under a new tech tax. The Telegraph reported on Nov 28 that crypto platforms would be subject to a 2% digital services tax, which first came into effect last year.
The HMRC also explicitly stated that crypto assets are not financial instruments. Consequently, they would not be able to claim an exemption for being a financial marketplace. It said,
There are a wide variety of crypto assets, each with different characteristics. It said that because cryptocurrencies do not represent commodities, financial contracts or money, it is unlikely that crypto-asset exchanges can benefit from the exemption for online financial marketplaces.
There has already been an effort by pro-cryptocurrency groups within the country to call for changes. The CryptoUK group states that treating cryptocurrencies differently from other assets is unfair.
But it seems unlikely that UK regulators will change their mind on the matter, as the country seems intent on regulating the market. The Financial Conduct Authority (FCA) has taken a number of steps in recent months to inform investors and warn market players against any violations.
The FCA and the Bank of England announced a joint effort that will see them deploy blockchain technology for regulatory reporting. The FCA Chairman has called for stricter regulation, though he does see promising use cases for the technology.
Crypto tax a major discussion point for governments
The UK’s bid to tax the cryptocurrency market is only one move in a global effort to tax the crypto market. Several countries have announced their intentions to tax the market if they haven’t done so already.
South Korea was among the first countries to introduce a tax scheme for the market. The hefty 20% tax rate riled investors, but the country’s authorities seemed firm on the matter. However, there appears to be a snag as the opposition party has called for a delay.
Argentina and Austria have more recently introduced tax laws for crypto, with varying approaches. Argentina will subject crypto transactions to a tax on credit and debts, while Austria will treat crypto assets like stock tokens in a tax scheme that will come into effect next year.