While there are still no clear regulations on cryptocurrencies in the UK, the authorities are currently seeking to impose taxes on crypto revenues.
According to a recent report by The Telegraph, an update to the regulations stipulated by Her Majesty's Revenue Customs (HMRC), the British tax authority, has introduced a digital services tax that will be levied on crypto firms servicing UK customers.
Crypto Firms to Pay 2% of Revenue in Tax
Per the update, HMRC has included crypto exchanges in the list of organizations that will pay the Treasury's tech tax, therefore, crypto exchanges in the UK will be required to pay about 2% of their revenue in tax.
The digital services tax, which was introduced last year, imposed a 2% sales levy on large online marketplaces, search engines, and social media platforms like Amazon, Google, and Facebook, with global revenue of over £500 million and over £25 million in UK sales.
Cryptocurrencies Not Financial Instruments in the UK
In a statement, HMRC noted that cryptocurrencies are not considered financial instruments in the UK, and as such, exchanges offering them are not eligible for financial exemptions.
In the agency's latest classification of crypto assets, HMRC pointed out that different digital assets in the crypto space serve different purposes, however, they do not satisfy the conditions for being classified as a commodity or financial instrument.
It said: "There are a wide variety of crypto assets, each with different characteristics... it is unlikely that crypto-asset exchanges can benefit from the exemption for online financial marketplaces."
Speaking on the latest developments, Ian Taylor, executive director of CryptoUK, a representative for the crypto sector, pointed out that the new tax is very unfair, as investors and traders will likely bear the brunt of the tax.
He alleged that the crypto industry has often been treated unfairly because investors view it as being different from other financial instruments like stocks.
He also noted that the new move is another heavy blow to the crypto industry following a series of stringent regulatory policies stipulated by the UK's Financial Conduct Authority (FCA) in recent months.
Earlier this year, the financial regulator mandated all UK-based crypto firms to submit annual financial crime reports, along with several other regulations.