Cryptocurrencies are not currencies. That’s the interpretation made by the UK tax department, HMRC, which refuses to exempt exchange platforms from a tax applied to digital service providers.
The tax department is not making life easier for exchange platforms
The tax in question has been around for a relatively short time: it was introduced last year to better tax certain tech giants, including Google and Amazon. It affects companies with aggregate revenue of more than £500 million ($660 million or so), with UK sales of more than £25 million ($33 million).
But as local media outlet The Telegraph reports, financial services platforms can claim to be exempt from the tax. Except that the British tax service considers that cryptocurrencies are not currencies, nor “commodities” (raw materials). For the institution, exchange platforms are therefore not financial services.
In a statement, HRMC thus explains:
“There is a wide variety of crypto-assets, each with different characteristics. […] It is unlikely that cryptocurrency exchange platforms will be able to benefit from the exemption [from the tax].”
Is the UK tightening the screws on service providers?
So cryptocurrency exchange platforms will have to pay the tax, which amounts to 2% of each sale. This affects a few giants in the sector, including the British version of Coinbase, which has seen its revenues increase sharply since last year.
The risk, of course, is that exchange platforms will impose this tax on buyers, as Amazon and Google have already done since last year.
While officially the local financial watchdog is not willing to rush into regulation, there are a few signs that the UK has its eye on the cryptocurrency sector. A few days ago, the Financial Conduct Authority (FCA) announced that £500,000 would be made available to track crypto-criminals.
There was also increased monitoring of advertisements related to cryptocurrencies since the summer. And the FCA and the banks have been united against the British version of Binance for a few weeks. Little by little, crypto services are thus more framed across the Channel.
