Liz Truss has been appointed by Queen Elizabeth II as the new Prime Minister of the United Kingdom. Liz, who secured 81,326 votes to Rishi Sunak’s 60,399 during the Conservative Party’s leadership poll, said it is an “honour to be elected” as she thanked her party for organising “one of the longest job interviews in history”. Following her win, a 2018 tweet by Truss started trending, where she said that the country should welcome cryptocurrencies and not “constrain their potential”.
What does this mean for the UK crypto market as a whole? Does this signal the legalising of crypto derivatives trading in the country? Or will stronger crypto regulations take the centre stage? Let’s try and understand the current crypto regulation scenario in the UK and how it might change.
Crypto regulation in the UK
To start things off, the UK allows people to buy and sell cryptocurrencies. Gains from crypto are subject to taxes.
In the UK, cryptocurrencies are subject to capital gains tax, which is a similar taxation structure stock trading faces. For example, if you invested GBP 100 and cashed out at GBP 120, your capital gain would be GBP 20. The country allows a tax-free allowance of GBP 12,300.
Businesses in UK, on the other hand, are required to pay capital gains tax, corporation tax, income tax, and more.
Under directives from UK’s Financial Conduct Authority (FCA), the sale of crypto derivatives to retail customers was banned in January 2021. Crypto derivatives are tradeable securities, which derive their value from an underlying asset, which can be any cryptocurrencies such as Bitcoin or Ethereum. As per Freeman Law, the FCA banned the sale of derivatives and exchange-traded notes (ETN) “that reference certain types of crypto asset to retail customers”. For those unaware, ETNs are unsecured debts that is traded in way similar to stock markets.
The UK in 2018 formed a Cryptoassets Taskforce, which comprises the FCA, the Bank of England, and Her Majesty’s Treasury. The task force is responsible for the regulation of crypto assets.
For any crypto exchange to operate in the UK, companies need to register with the FCA, or apply for an e-money license. Recently, crypto exchanges have been mandated to notify the UK authorities of any suspected sanctions violations under new regulations introduced in response to concerns that Bitcoin and other crypto assets are being used to dodge restrictions imposed in reaction to Russia’s invasion of Ukraine. On August 30, official guidelines were revised to specifically include “cryptoassets” among the things that must be blocked if sanctions are placed on a person or business.
What did Truss tweet on crypto?
Back in January 2018, when was the Chief Secretary to the Treasury and when the Cryptoassets Taskforce was established, Truss tweeted, “We should welcome cryptocurrencies in a way that doesn’t constrain their potential.”
We should welcome #cryptocurrencies in a way that doesn’t constrain their potential. Liberate free enterprise areas by removing regulations that restrict prosperity. #PolicyExchange #futureoffreedom #shakeup
— Liz Truss (@trussliz) January 30, 2018 In 2020, when Truss was serving as the Secretary of State for International Trade and President of the Board of Trade, she said she wanted to explore blockchain and “create great opportunities” in the sector.
What are Indian crypto exchanges saying about Truss’ tweet?
Truss’ crypto-friendly approach has been largely welcomed by the crypto community in various countries, including India as well.
“Since the UK is emerging as a global leader alongside the US and Ukraine in the overall use of crypto, Liz has an excellent opportunity to transform the country into a crypto hub encouraging blockchain technology,” Edul Patel, CEO and co-founder of crypto platform Mudrex told ABP Live. “Let’s hope for friendly progressive regulations around crypto and blockchain in the coming days, making way for even more innovations in the space.”
Commenting on the tweet, Unocoin CEO and co-founder Sathvik Vishwanath said, “To increase the potential of cryptocurrencies, Truss proposed freeing up free enterprise areas by removing regulations that limit prosperity.”
“Expectations for reforms such as tax cuts, the energy crisis, and other long-term economic growth issues have increased since Truss took over as UK leader. The cryptocurrency market also believes that Truss’ new role could govern digital assets and bring policy changes that will not limit their potential,” Vishwanath told ABP Live.
Vishwanath added that UK is currently undertaking a series of measures to make the UK a “global hub for crypto-asset technology and investment.” He explained, “Measures include legislation for a ‘financial market infrastructure sandbox’ to help firms innovate, an FCA-led ‘CryptoSprint’, a collaboration with the Royal Mint on NFTs, and a dedicated group to work more closely with industry.”
Dileep Seinberg, the founder and CEO of bill payment and utility crypto platform MuffinPay, told ABP Live, “Liz Truss gave her thumbs up to cryptocurrencies in 2018. As she is appointed to represent the country, this is likely to boost the UK government’s agenda for digital assets, including launching its own CBDC for regulated payments.”
Calling her an “anti-regulatory personality”, Seinberg added, “The UK is among the first-world countries but is facing a severe energy crisis. The only fear for crypto space is on this front, as mining tokens consumes high energy. If things align with the crypto industry’s expectations, the UK may emerge as the crypto or Web3 capital of the world. If Truss has a vision, she would need to walk the talk as her mission. A friendly and comprehensive approach might be on the platter in the coming days.”
CoinSwitch Kuber CEO Ashish Singhal tweeted, “This is another example of emerging global consensus: Crypto, like any cutting-edge technology, is a force for good when guided by regulations.”
“The potential is immense: Today, crypto’s use-cases are in finance, but the tech could well build an internet that redistributes control back to users. Web3 projects are already advancing: Be it on distributed storage, privacy or creator-friendly music streaming,” Singhal added. “This explains the forward-looking statements by world leaders such as Truss and US President Joe Biden (executive order in March), as well as the progress these economies have made in implementing comprehensive crypto regulations.”
“Now, India is well poised to take the lead here, even if we are a step or two behind. Our digital infrastructure, talent pool and startup ecosystem, and tech-savvy users are the magic ingredients needed to build a desi Web3. Hopefully, our policies will scale up fast,” Singhal tweeted.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.