Cryptocurrency has gained multi-fold popularity in the past few years. There is an increase in the number of investments in this domain. Also, many large-scale companies are trying their investments in this model. Such institutional investments have also attracted individual investors to study this model. Yet another reason for this growing interest is the pandemic and lock-down. Many investors were confined to their homes while exploring options to make easy money. The number of investors in cryptocurrencies has increased by more than 20% in the past two years. You can check it at bitcoin code site.
Also, the working model of cryptocurrencies is another advantage attracting investors. Cryptos make use of blockchain technology to complete user transactions. It is an online ledger that stores user transactions on the network. These transactions are hosted on multiple user computers globally. There are data miners across the globe who validates crypto transactions. These validators solve complex mathematical problems and confirm each transaction. During crypto transactions, the crypto token is transferred from one wallet to another. Such transactions do not involve any central banks or regulatory agencies. In short, cryptos eliminate the role of banks in monitoring user transactions.
Considering the growing advantage of cryptos, there have been multiple studies launched for it. Since there is no regulation involved, cryptos are allegedly used for money laundering. In the past, there have been instances of cases identified on cryptos funding anti-terrorism as well.
Understanding crypto adoption in the UK
Crypto adoption as a legal tender is still a long dream. Many countries are looking at opportunities to understand cryptos and their implications. A government can't accept such digital currencies. There need to be stricter regulations and monitoring capabilities. Cryptos or digital assets hold the ability to impede the entire economical setup.
But, compared to other countries the UK government has taken a fair approach to cryptos. Let us look at certain key factors, regulations, and approaches adopted.
The HMRC recognized cryptocurrencies as digital assets. These assets are subjected to capital gains and taxes in the country. Unlike traditional currency, cryptos are classified into four different types. It includes stability, utility, security, and exchange tokens.
At the beginning of 2020, the Financial Conduct Authority obtained powers to review crypto. The committee monitors all individuals and institutions involved in crypto transactions. The committee aimed to prevent cryptos utilized for anti-terrorist activities. Any business dealing with cryptos needs to undergo a rigorous licensing process. Crypto exchanges include registration with FCA and other money laundering acts.
Also, the FCA has made it mandatory for all exchanges to complete KYC. Irrespective of the volume, a KYC is mandatory for crypto trading.
Aside, from FCA regulation the UK government has also implied tax regulations on crypto assets. Individuals and institutions involved in crypto transactions need to pay capital gain. It applies to all profits made on crypto investments.
The country also took steps to ban any misleading advertisements on crypto. Regulations have been put in place to ensure that there is clear guidance on crypto adverts. The underlying risk of crypto investments and needs to be explicitly mentioned. Every investor needs to fully understand the risks involved before making any funding.
Growing UK as a global home for crypto investments
Now that the government has gained some momentum and control over cryptos. The UK government is all set to establish the country as a global home for cryptos. In a recent announcement by a parliamentary committee, APPG s launching an inquiry on cryptos. The inquiry will shift their focus on the country's crypto investments. It will study the volume of investments and check the government plan to make UK a crypto hub.
The APPG also announced that the committee will be setting up evidence sessions in the coming months. The government will undertake evidence-gathering exercises through various public meetings. Besides this, the government will also be reaching out to crypto players in the market. Inputs and suggestions from each of these players shall play a critical in decision making.
Once the inquiry period is complete, the committee will collate all evidence. It will share these reports with the government for further evaluation.
Commenting on this move, the chairperson of APPG opined that it is a crucial period for cryptos.
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