Cryptocurrency tax regulations in the United Kingdom are an essential consideration for any individual or business involved in cryptocurrency trading. Her Majesty’s Revenue and Customs (HMRC), the UK’s tax authority, has provided guidance on how cryptocurrencies, or as they term them, “cryptoassets,” are taxed.
How are cryptocurrencies defined in the UK?
To begin, it’s crucial to understand how HMRC classifies cryptocurrencies. They recognise three types of cryptoassets: exchange tokens (like Bitcoin), utility tokens, and security tokens. The tax treatment depends on the nature and use of the token. For our purposes, we will mainly focus on exchange tokens, which are most commonly used for trading.
HMRC does not consider cryptocurrencies as currency or money. Instead, they are viewed as a form of property. As a result, the buying, selling, and even trading of cryptoassets can have tax implications. Specifically, two types of taxes are most relevant to crypto trading in the UK: Capital Gains Tax (CGT) and Income Tax.
CGT is the primary tax applied to profits made from buying and selling cryptocurrencies. When a person disposes of a cryptoasset – either by selling it, exchanging it for another cryptocurrency, using it as payment, or gifting it – they may be required to pay CGT on any gains they have made.
The taxable gain is the difference between the purchase price (plus associated costs) and the sale price (minus any transaction costs). However, each individual has an annual tax-free allowance for capital gains, known as the Annual Exempt Amount. For the 2022/23 tax year, this was £12,300. If the total taxable gains in the tax year are below this amount, there is no CGT to pay.
If the total gain exceeds the Annual Exempt Amount, CGT is due. The rate of tax depends on the individual’s income and the asset type. As of my knowledge cutoff in September 2021, the tax rate for individuals is 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. For businesses, the Corporation Tax rate applies.
Calculating gains and losses from crypto trading
The calculation of gains or losses can be complex due to the volatility of cryptocurrencies and the fact that they are often traded in pairs. When calculating the gain or loss for CGT purposes, the Sterling value of the cryptocurrency at the time of acquisition and disposal must be used.
In some cases, trading cryptoassets may be considered a trade, much like trading in shares or property. If the level of activity, nature of the sales, and decision-making process indicate a financial trade, the profits may be subject to Income Tax instead of CGT. This might be the case for individuals who are regularly day trading or swing trading cryptoassets.
Income Tax would also apply to individuals who receive cryptoassets as a form of payment or through mining, transaction confirmation, or airdrops. The amount of Income Tax due depends on the individual’s Income Tax band, with rates ranging from 20% to 45%.
HMRC also has rules on ‘Pooling’ for cryptoassets. Instead of tracking the gain or loss for each transaction, cryptoassets of the same type and acquired in the same way can be ‘pooled’ together. Each pool calculates its own ‘allowable cost’ – the total cost of the pooled tokens plus any allowable costs. When a token is disposed of from the pool, a proportion of the pooled allowable cost is deducted to work out the gain.
In terms of record-keeping, HMRC requires individuals and businesses to keep records of each cryptoasset transaction for at least 5 years after the tax year they relate to. This should include the type of cryptoasset, date of the transaction, if they were bought or sold, number of units, value of the transaction in pound sterling, and the cumulative total of units held.
Summary
In summary, the tax implications of crypto trading in the UK can be complex and depend on a variety of factors. HMRC’s guidelines offer a starting point, but given the complexity, seeking advice from a tax advisor or professional well-versed in cryptoassets can be extremely beneficial. It is also essential to stay updated with any changes to tax legislation and HMRC guidelines regarding cryptoassets, as these may change over time.
The European Systematic Risk Board (ESRB), an EU financial watchdog, is advising restrictions on cryptocurrency leverage to preserve the financial stability of the overall market. Historical precedent suggests that firms often collapse under high-leveraged bets, leading to broader market cash shortages and potential recessions.
The ESRB’s suggestion, as reported by Reuters, primarily targets investment funds, exchanges, and similar entities involved in cryptocurrency trading. High-leveraged trades, even for retail investors, can result in a total loss of initial capital—a phenomenon known as liquidation. Given the high volatility of cryptocurrencies, traders frequently face significant liquidation losses, with a recent 24-hour period seeing over $82 million lost.
“Systemic risks could arise quickly and suddenly,” warned the ESRB. “If the rapid growth trends observed in recent years were to continue, crypto-assets could pose risks to financial stability.” The board’s concerns are not unique; Japan’s Financial Service Agency has already enforced similar limitations, restricting investors from borrowing more than twice their investment amount for leverage trades. This conservative approach may have contributed to FTX’s Japanese entity enabling withdrawals earlier this year.
While the ESRB oversees the broader market and works to mitigate systemic risks, it lacks the direct authority to enforce crypto leverage limitations. Instead, its role is to propose these recommendations for inclusion in future versions of the EU’s Market in Crypto-Assets (MiCA) legislation.
Last week, all 27 EU member states unanimously approved the MiCA rules, slated to take effect from July 2024. With the ESRB’s recommendations, the European Union may see more comprehensive crypto regulations in the near future.
In a landmark move, two U.S. presidential contenders, Vivek Ramaswamy and Robert F. Kennedy Jr., have declared their intention to accept Bitcoin (BTC) donations for their campaigns. Kennedy, a potential Democratic candidate, broke the news at the Bitcoin 2023 convention, making his campaign the first in U.S history to publicize cryptocurrency acceptance.
Kennedy further promised to promote neutral energy regulations, addressing concerns around the energy-intensive process of Bitcoin mining. He committed to ensure that Bitcoin won’t be classified as a security, advocating a more welcoming regulatory environment for cryptocurrency enterprises. Additionally, he indicated a potential presidential pardon for Silk Road founder, Ross Ulbricht, raising a note of interest among crypto libertarians.
Matching Kennedy’s progressive approach, Republican candidate Vivek Ramaswamy also announced his campaign’s acceptance of BTC donations. He publicized this through a tweet featuring a BitPay donation link, inviting supporters to donate up to $6,600 worth of crypto. He also urged for the upcoming 2024 elections to focus on fiat currency discussions.
In addition to Bitcoin, BitPay’s platform accepts several other cryptocurrencies like Bitcoin Cash, Ether, Litecoin, and Dogecoin. Ramaswamy also offered a unique incentive: anyone who donates to his campaign can mint a commemorative Non-Fungible Token (NFT) using the Proof of Attendance Protocol (POAP).
In sum, these moves showcase the increasing integration of cryptocurrency in mainstream politics, with prospective leaders acknowledging its significance in democratic processes and pledging to foster an inclusive crypto environment.
A new fraudulent service named “Inferno Drainer” has allegedly purloined close to $6 million from unassuming crypto users, as reported by Scam Sniffer, a Web3 scam detection firm. Inferno Drainer is said to offer pre-packaged code to fraudsters, enabling them to pilfer cryptocurrency in return for a 20% share of the fraudsters’ ill-gotten crypto gains.
This fraudulent service was unearthed by a security aficionado and anonymous Twitter user 0xSaiyanGod, who stumbled upon a promoter of the scheme on the Scam Sniffer Telegram channel. Saiyan reported the alleged fraudster to the channel, sparking an investigation by the security service. Scam Sniffer discovered a screenshot depicting a $103,000 drain transaction employing a Permit2 exploit, a type of phishing scam that simplifies the token approval process.
According to Scam Sniffer, the screenshot displayed the transaction hash of the theft, which led the team to locate the transaction and consequently, the perpetrator’s address. Scam Sniffer subsequently found that this address was linked to over 689 phishing sites established since March 27, and had siphoned off $5.9 million from victims across various networks, including Ethereum, Arbitrum, Polygon, and BNB Chain. Scam Sniffer developed a Dune analytics dashboard to present data that supports these findings.
As per the report, Inferno Drainer touted its “service” to fraudsters for a 20% slice of the earnings. It also offered to construct phishing sites for clients for a 30% cut, but this was exclusive to “good customers or individuals with significant potential.”
The issue of fraud as a service has become increasingly prevalent in the crypto space in recent months. A similar service named “Monkey Drainer” was detected by ZachXBT in October. It managed to drain at least $1 million in ETH from users before ceasing operations in March.
The inaugural Future Go Tech Summit, a conference dedicated to exploring emerging tech trends, is set to take place on June 29 and 30 at the vibrant Das Das venue in sunny Istanbul. The event promises to unite key stakeholders from government, business, the consumer sector, and influential figures reshaping the entertainment industry.
For a span of two days, industry frontrunners will delve into intriguing opportunities, tackle daunting challenges, and address the most urgent matters in the tech realm.
The summit’s agenda is designed to cater to its four key audiences — consumers, businesses, government, and entertainment — providing insights into technological shifts from unique perspectives relevant to each group. The gathering will unite over 200 corporate leaders from renowned companies like Huawei, Meta, Google, McKinsey, Bloomberg, and others.
The event will feature numerous hands-on keynote speeches, sessions, and roundtable discussions, revolving around cutting-edge subjects defining the current and future tech landscape: XaaS, AI, automation, IoT, Web3, digital public administration, sustainable technologies, play-to-earn mechanisms, eCommerce, and wellness.
Beyond the traditional panel discussions, keynote presentations, and workshops, Future Go will provide a mix of unique infotainment activities, such as stand-up comedy nights, cocktail receptions, business runs, and more.
These activities are designed to elevate attendee engagement at the conference, infusing an element of fun and fostering a sense of community around the summit.
In conjunction with the main event, the Future Go Awards ceremony will take place to honor leaders making remarkable strides in the tech and blockchain sectors. Nominees will be selected based on the impact of their projects, user conversion, and their contribution to technological advancement. A jury composed of 12 highly regarded tech community experts will handpick the winners, favoring those who have demonstrated a profound understanding of their users’ challenges and developed effective technological solutions. The key criterion for winning is that the project must enhance our way of life. The awards ceremony, followed by an afterparty, is anticipated to provide a grand conclusion to the summit, leaving attendees with unforgettable memories and a positive impression.
For the duration of the two-day event, Das Das, usually a concert hall, will transform into a hub pulsating with technological vibrancy. Attendees will have the opportunity to network with global tech leaders, gain inspiration, acquire knowledge on the latest tech trends, participate in interactive keynote speeches, and form unique, impactful opinions.
Attendees will be able to use the knowledge and experiences gained at the summit to breathe new life into their business ventures.
Tesla has unveiled new video footage featuring its Tesla Bots, which now demonstrate the ability to walk steadily, identify objects, and pick up items. The video was shown by Tesla’s CEO, Elon Musk, during the company’s shareholder meeting event.
The footage reveals significant enhancements made to the Tesla Bot project, including improved motor torque control, AI training derived from human movements, and object manipulation abilities. Notably, the humanoid robots can now walk in a straight line without requiring aid from Tesla’s staff.
In one of the demonstrations, a Tesla Bot was seen transferring items from one container to another, suggesting a potential application for robots performing tasks similar to human beings. This action highlighted how the bot’s AI could be trained through human demonstrations.
The humanoid robots were first introduced at Tesla’s AI Day in October 2022. At that time, the robot could barely move forward, with its internal mechanisms exposed. A more fully assembled version was also displayed, but it needed support from the staff to remain upright.
The unveiling of the new footage elicited varied reactions from internet users, with some applauding Tesla’s new achievement, and others humorously threatening to confront the robot if they encountered it on the streets.
This latest robot demonstration came shortly after Musk announced his decision to resign as Twitter’s CEO. On May 11, Musk stated that he would assume the roles of executive chair and chief technology officer at Twitter, focusing his attention on product, software, and system operations.
Linda Yaccarino will succeed Musk as CEO. On May 12, the billionaire declared his eagerness to collaborate with Yaccarino in transforming the platform into “X, the everything app.”
Bitcoin enthusiasts are presented with a potentially more streamlined approach to create new assets on the blockchain. This comes as Lightning Labs unveils an updated version of the recently renamed Taproot Assets Protocol.
In a blog post dated May 16, Lightning Labs, a Lightning Network infrastructure company, disparaged current procedures for creating assets on the Bitcoin blockchain. They described them as “exceptionally inefficient,” citing unwieldy protocols that inscribe asset metadata “directly into block space.”
The Taproot Assets Protocol is engineered to function “predominantly off-chain” in an effort to sidestep the network congestion that has unfortunately become a hallmark of the Bitcoin network since the BRC-20 token standard was introduced by anonymous developer “Domo” on March 8.
Lightning Labs suggested that Protocol users could soon incorporate BRC-20 assets into the Lightning Network, with wallets, exchanges, and merchants being adapted rather than having to construct a whole new ecosystem from the ground up.
Domo previously asserted that the Taproot Assets Protocol provides a superior option for creating new assets on Bitcoin compared to pre-existing methods like JavaScript Object Notation (JSON). This is because it allows users to transition to the Lightning network for transactions that are both swift and inexpensive.
The vast majority of BRC-20 tokens created to date employ Ordinal inscriptions of JSON data to launch token contracts, mint tokens, and transfer them. This method has received broad criticism from developers, who argue that the process incurs four times the transaction fees compared to using binary.
The Taproot Assets Protocol is a newly rebranded iteration of the original “Taro” protocol. Lightning Labs had to alter the software’s name due to what they described as an “unwarranted” trademark infringement lawsuit lodged against them by blockchain development firm Tari Labs on Dec. 8 the previous year.
The total value of BRC-20 tokens briefly exceeded $1 billion on May 9, but has since declined to $500 million, a decrease of nearly 50%.
Creditors of the insolvent cryptocurrency lending business BlockFi have lodged a fresh court document, challenging the company’s most recent restructuring proposal.
On May 12, BlockFi detailed its Chapter 11 restructuring strategy in a document submitted to the United States Bankruptcy Court in Trenton, New Jersey. The firm suggested that a sale of BlockFi might not yield sufficient value for its creditors given its outstanding debt of nearly $1.3 billion to its top 50 creditors.
Countering this, BlockFi creditors filed an additional court document on May 15, accusing BlockFi of intentionally delaying the court proceedings.
Represented by the Brown Rudnick law firm, the creditors of BlockFi highlighted that the firm liquidated approximately $240 million in cryptocurrency prior to declaring bankruptcy in late November 2022. They underlined that the crypto assets were sold “at the nadir,” referring to a substantial market decline following the FTX collapse.
The creditors criticized BlockFi’s decision to liquidate almost all domestic cryptocurrency in November 2022 as ill-judged, costing them over $100 million in subsequent months. They also pointed out “unnecessary and undesired tax consequences,” asserting that the sale was not relevant to its bankruptcy proceedings. The filing stated:
“Selling $240 million in cryptocurrency was never rationally related to bankruptcy funding needs, given that no reasonable estimate would peg the costs of this bankruptcy at $240 million.”
According to the creditors, BlockFi expended $22.5 million of client funds to purchase a $30 million insurance policy, following the disposal of digital assets before filing for bankruptcy.
The creditors argued in their document, “By selling everything pre-petition, BlockFi provided itself with an almost unlimited budget, essentially shielded from the bankruptcy’s adversarial process, to conduct its case for as long and as contentious as it deems appropriate without the ‘typical milestones’ in a DIP or cash collateral order.”
The plaintiffs urged the court to expedite the case’s conclusion by transferring the estate assets “into the hands of new management.” They reiterated that such a situation appears incongruous with the debtors’ case objectives.
BlockFi did not immediately respond to Cointelegraph’s request for comment.
The total count of Bitcoin wallet addresses possessing at least one BTC has crossed the milestone of one million.
Data from Glassnode confirms that this benchmark was achieved on May 13.
A significant rise in wallet addresses owning a minimum of one Bitcoin was observed last year as the cryptocurrency’s price plummeted by over 65%. The most prominent increases happened during a severe market downturn in June and from November 11, following the bankruptcy declaration by FTX.
As Bitcoin’s price declined from its peak in November 2021, approximately 190,000 “wholecoiners” joined the ranks from early February 2022.
Glassnode co-founder Negentropic advised his 54,000 Twitter followers that the optimal time to invest in Bitcoin is during market distress.
This advice comes amidst several major bank failures in the U.S. and potential halting of interest rate hikes by the Federal Reserve. These factors contribute to Glassnode’s continued belief in Bitcoin’s potential to reach $35,000 in the mid-term.
While the milestone of “one million” is notable, it’s essential to remember that a single Bitcoin wallet address doesn’t necessarily equate to one individual.
Many Bitcoin investors manage multiple addresses, and others belong to major entities like cryptocurrency exchanges and investment firms that often hold substantial Bitcoin quantities.
CoinGlass, a crypto analytics provider, estimates that out of the roughly 19 million Bitcoin in circulation, 1.89 million BTC — valued at $50.7 billion — are held by large centralized exchanges such as Binance and Coinbase.
Moreover, Glassnode’s estimates suggest that an astonishing 3 million BTC — equivalent to $80.4 billion and 17% of the total circulating supply — are irretrievably lost. These estimations are based on various data sources, including BTC sent to “burn addresses,” wallets with lost keys, and substantial accounts that have been inactive for over a decade.
The US Department of Justice (DOJ) is intensifying its efforts against hackers and exploiters in the Decentralized Finance (DeFi) sector, following a significant increase in illicit cryptocurrency activities over the past four years.
Eun Young Choi, the head of the DOJ’s National Cryptocurrency Enforcement Team (NCET), shared in a Financial Times report on May 15 that the DOJ is zeroing in on thefts and cyber-attacks related to DeFi, with a special focus on “chain bridges.”
Choi highlighted that this is a considerable concern for the DOJ, especially since North Korean state-sponsored hackers have been identified as major players in this area.
Cointelegraph reported in February that North Korean hackers had pilfered an estimated $630 million to $1 billion in cryptocurrency assets in 2022 alone.
Choi, who has nearly ten years of prosecutorial experience with the DOJ, was named the inaugural director of the NCET in February 2022. The DOJ stated at that time that the NCET would act as the primary hub for the department in dealing with matters related to cryptocurrency, cybercrime, money laundering, and asset forfeiture.
The DOJ underscored that they would specifically target “mixing and tumbling services,” but there was no mention of DeFi platforms in their initial announcement.
Speaking at the recent Financial Times Crypto and Digital Assets Summit, Choi reaffirmed that the DOJ is targeting cryptocurrency companies that either commit crimes or knowingly permit such activities to occur, thereby facilitating money laundering.
Choi underlined that focusing on the platforms where these activities originate could have a multiplying effect by making it harder for criminals to reap the benefits of their illicit activities.
She also noted that the extent and variety of illicit uses of digital assets have significantly increased in the past four years.