The UK’s Financial Conduct Authority remains officially silent on the regulation of virtual currencies – privately, it has confirmed that Bitcoin does not amount to money or money’s worth nor electronic money, so that most activities related to Bitcoin are not regulated. However, in the context of an initiative to help support innovation in the financial services sector, setting the goal for “an FCA that creates room for the brightest and most innovative companies to enter the sector“, it has commented that it wishes to ensure positive developments such as Bitcoin are supported by the regulatory environment. Other developments noted as having “transformed finance in improbable timescales” include crowd funding.
Separately, the UK’s taxation authority has issued a very helpful briefing: “Bitcoin and other cryptocurrencies” which sets out HM Revenue and Customs (HMRC) position on the tax treatment of income received from, and charges made in connection with, activities involving Bitcoin and other similar cryptocurrencies, specifically for VAT, Corporation Tax (CT), Income Tax (IT) and Capital Gains Tax (CGT). The brief includes confirmations such as:
- when Bitcoin is exchanged for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the Bitcoins themselves;
- as with any other activity, whether the treatment of income received from, and charges made in connection with, activities involving Bitcoin and other similar cryptocurrencies will be subject to CT, IT or CGT depends on the activities and the parties involved;
- for businesses which accept payment for goods or services in Bitcoin there is no change to when revenue is recognized or how taxable profits are calculated.
The combination of the UK’s ‘wait and see’ regulatory and its pragmatic taxation approach mean it is now one of the best jurisdictions for Bitcoin start-ups. Which just leaves finding a banking partner …