- The UK Treasury Committee’s call to regulate crypto like gambling has enraged the crypto community.
- Some wonder if it will mean that Bitcoin traders will enjoy tax-free gains just like gamblers do.
Will crypto be tax free in the UK?
That is an unexpected and pressing question following the UK Treasury Committee’s call for the government to regulate cryptocurrencies as a gambling industry in a new report published Wednesday.
The recommendation raised eyebrows among members of the UK’s crypto community. It wasn’t just equating the burgeoning asset class to casino games that irked industry participants.
Ben Lee, a crypto practice partner at the tax consultancy Andersen, wondered whether the move would change the tax status of digital assets.
“Winnings from gambling are generally tax free, and the report is conspicuously silent on the possible impacts that this may have on the established approach to the taxation of crypto assets,” Lee told DL News.
At the moment, crypto traders in the UK must pay tax on capital gains. Even so, British lawmakers are taking steps to make the most significant change in the regulatory status of Bitcoin and its ilk in some time.
“With no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such,” said Harriett Baldwin, the committee’s Conservative chair.
It may well be that the committee didn’t consider the tax implications of its recommendation.
“Does the government really wish to exclude tens of millions of pounds in tax income from gains made by the buying and selling of unbacked crypto assets?” said Ian Taylor, the board advisor at CryptoUK, a lobbying organisation.
Baldwin’s office did not immediately return DL News’ questions to clarify whether crypto gains would be tax free under the committee’s recommendations.
The Treasury Committee’s surprising recommendation also appears to run counter to Prime Minister Rishi Sunak’s pledge to support a hotbed of digital asset innovation in a nation struggling to stimulate growth industries. The government has undertaken a series of taxpayer-funded consultations into how best to regulate the industry.
While industry types have criticised policymakers for lumping DeFi and crypto together, they are optimistic about the industry’s outlook in post-Brexit Britain.
Those consultations — together with the Financial Services and Markets Bill which is currently making its way though the House of Lords — are expected to create conditions where crypto asset service providers and investors can thrive.
‘The committee’s suggestion that crypto assets should be regulated as gambling products is misguided and wholly unsuitable for UK consumers’— Blair Halliday
But the Treasury Committee said it feared regulating consumer crypto trading as a financial service the way the government is seeking may “lead consumers to believe this activity is safe and protected, when it is not.” It also said the benefits of crypto assets in financial services remain unclear.
Conflating crypto and gambling won’t do anyone any favours, say critics. “The calls now for cryptocurrencies to be regulated as a form of gambling appear to go significantly against the public, industry, and government’s views,” said Daniel Seely, financial services lawyer and expert in crypto at national law firm Freeths.
Blair Halliday, UK managing director at crypto exchange Kraken, said he “strongly believes the UK Government and FCA are on the right path to developing proportionate regulations” and that he was “disappointed that only one FCA-registered crypto asset firm was represented on the committee’s evidence panel.”
“The committee’s suggestion that crypto assets should be regulated as gambling products is misguided and wholly unsuitable for UK consumers,” Halliday said. “Not only does this miss the purpose and potential of the technology, but gambling protections will not offer the same safeguards as bespoke financial services regulations, on which the government recently consulted.”
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