Cryptocurrency exchanges operating in the UK will have to pay the 2% Digital Service Tax, according to a new regulatory update from Her Majesty’s Revenue and Customs (HMRC).
Crypto exchanges will have to pay a 2% tax
According to an article in the Telegraph, crypto exchanges in the UK will now have to pay a 2% tax on digital services. The move follows HMRC updating its guidelines, stressing that there are many crypto assets with different characteristics and that it does not recognize digital assets as financial instruments, so exchanges do not qualify for financial exemptions.
The digital service tax was introduced in April last year to ensure technology giants like Facebook and Amazon pay more. According to CryptoUK, the trade association representing the digital asset sector in the UK, the tax is unfair and is likely to be passed on to investors and traders. Executive director Ian Taylor said that the treatment of cryptocurrencies compared to other financial instruments such as stocks or commodities hurts the crypto industry.
British regulators put pressure on crypto exchanges
UK regulators have been cracking down on crypto exchanges in recent months, passing laws to crack down on some operators. For example, the FCA has tried to ban crypto exchange Binance from operating in the UK due to weak anti-money laundering laws. The regulator imposed a ban on crypto derivatives in January, and in June, the FCA warned consumers against 111 crypto firms that had yet to register with it.
In addition, the latest legislation adds to the UK’s tax laws on cryptocurrencies, which are considered opaque. Currently, the UK does not impose taxes specifically on cryptocurrencies. Anyone holding them as a personal investment is subject to capital gains tax on their profits. UK tax authorities reportedly demanded that several cryptocurrency exchanges hand over information about their customers’ transactions and holdings in August 2019.