Laws concerning cryptocurrency/Bitcoin in the UK are unclear.
To answer the question, it’s perfectly legal for consumers to purchase Bitcoin and any other cryptocurrency as of the time of writing. The confusion in British law in regards to cryptocurrency involves exchanges and the business side of cryptocurrency.
Further complicating matters is Brexit – the UK’s decision to exit the European Union. For those that don’t know, the European Union is very open to cryptocurrency. In fact, the European Union more or less endorses cryptocurrency.
Anyway, we will attempt to clear the air on cryptocurrency laws in the United Kingdom. Just keep in mind that, like everything cryptocurrency related, things can change fast. Always check the laws before purchasing Bitcoin or any cryptocurrency.
British Government Stance on Cryptocurrency and Bitcoin
It’s important to cover the public stance that the Bank of England – that’s the central bank of the United Kingdom – has taken on cryptocurrency.
Put simply, the Bank of England has not taken a very positive view of cryptocurrency. The previous chairman of the Bank of England, Mark Carney, has stated on numerous occasions that cryptocurrency is a “danger to the stability of financial markets.”
On a positive note, Carney did not call for a ban on cryptocurrency. However, he has called for similar regulations that gold and stocks must deal with be placed upon cryptocurrencies.
In addition to that, Carney expressed a positive view of Facebook’s cryptocurrency Libra. He even noted that financial transaction fees are too high for consumers and small businesses, which he surmised led to the rise of fintech.
Of course, he still emphasized that regulations must be placed on cryptocurrency, which is an expected statement from the Bank of England.
Overall, the British government has a fairly negative view on cryptocurrency, but they do not appear to have any plans to outright ban cryptocurrency. The main focus of the British government appears to be increased regulation to prevent money laundering and terrorism.
An annoying, but understandable, stance for a government to take on cryptocurrency.
However, the story does not end there. Carney’s term as chairman of the Bank of England ended in March of 2020. His successor, Andrew Bailey, has a dimmer view of cryptocurrency.
He once said that you should expect to lose all your money if you invest in Bitcoin.
Not the best statement for a government representative to make about Bitcoin. Fortunately, Bailey does not appear willing or able to ban cryptocurrency in the UK.
He simply has a very dim view of it.
With that in mind, experts expect heavier regulations on cryptocurrency in the UK during Bailey’s tenure as chairman of the Bank of England.
What regulations does the UK have on Bitcoin and other cryptocurrencies?
At the moment, the UK only has Know Your Customer (KYC) regulations in place to purchase cryptocurrency in the UK. These regulations dictate that you must submit photo identification to purchase cryptocurrency.
This is in place to reduce money laundering and terrorism. With that said, KYC rules only apply if purchasing Bitcoin from an exchange. If you purchase Bitcoin from a private party on LocalBitcoins, then you do not have to submit a KYC check.
Most of the regulations on cryptocurrency in the UK appear to be aimed at cryptocurrency companies. Really, the UK is trying to avoid allowing pump and dump scams to occur.
How do taxes on cryptocurrency in the UK work?
Tax code is extremely complicated, so we advise consulting a tax professional for tax advice.
However, we can say that the UK views cryptocurrency the same as any other asset – you only owe tax on any realized gains. You are also allowed to write off any realized losses on your tax return.
The complicated part with this is that it is considered a realized gain (or loss) if, for instance, you sell Bitcoin for Ethereum at a profit.
This makes filing taxes complicated.
Now, the big question. Does the HMRC enforce British tax regulations concerning cryptocurrency?
It’s a complicated answer. But in general, the HM Revenue and Customs (HMRC) takes a much less aggressive stance on cryptocurrency enforcement than the Internal Revenue Service in the US.
Will the UK regulate the amount of Bitcoin that can be purchased in a day?
The UK has regulations on the amount of stocks that an individual can purchase in a day. They also have day trading regulations that impact the amount of stock transactions that someone can make in a day.
At the moment, it does not appear that the UK has any plan to regulate cryptocurrency in this manner.
Is Bitcoin legal in the UK?
To simply answer the question, Bitcoin is legal to buy, sell, and mine in the UK. Britons do have some issues with taxes and will have to submit identification to satisfy KYC regulations, but Bitcoin is perfectly legal in Britain.
Will Brexit have any impact on the legality of cryptocurrency in the UK?
No. It is extremely unlikely that Brexit will have any impact on the legality of cryptocurrency in the UK because the British government appears unwilling to make cryptocurrency illegal.
As written earlier, the focus of the British government, and other developed nations, is on regulating cryptocurrency instead of making it illegal.
We hope you learned something about the legality of Bitcoin in the UK – it’s not illegal. And it appears that the UK has no intention of making Bitcoin, or any other cryptocurrency, illegal.
However, we do expect the island nation to add an increasing amount of regulations on cryptocurrency in the medium-term future.
In addition to that, it appears the British government will never take as progressive a stance as the European Union has taken on cryptocurrency.
All in all, cryptocurrency will remain legal in the UK, but the British government will emphasize the dangers and risks of investing in the cryptocurrency for the foreseeable future.
Fortunately, Bitcoin has had many detractors since its inception. And it will overcome the detractors just like it has done for the past nine years.