Crypto specialists cautiously welcome regulation plans – Zoe Wyatt
Partner and Head of Crypto, Zoe Wyatt, comments on Sunak’s announcement that cryptoassets with a value pegged to that of a conventional fiat currency are to ‘be brought within the scope of regulation’.
Further to a Keynote Speech by John Glen, Economic Secretary to the Treasury, at the Innovate Finance Global Summit during Fintech Week 2022, Zoe Wyatt commented:
“To date, the FCA has only granted AML licences to 33 crypto businesses, despite there being applications from c.160. Anecdotally, the FCA has told a number of UK success stories that they will not get a licence and must offshore. Sadly, we have been helping them to do that. This has resulted in the loss of thousands of jobs and critical talent from the UK.
“It appears that the FCA is under resourced, underfunded, lacks knowledge of the sector and has no appetite to regulate because of the perceived risk. This is damaging innovation.
“John Glen’s speech is timely and welcomed but means nothing unless, as he says, the government “commits now”, “acts now” and “leads the way”. It is paramount that the opportunity for the UK is properly understood, and action taken quickly.
“Through the planned Crypto-Sprints and the Cryptoassets Engagement Group, there needs to be real engagement with industry, the UK trade body CryptoUK and with the APPG for Crypto and Digital Assets.
“It is good to hear that not only is it on the government’s radar that the current approach to taxing DeFi transactions is not fit for purpose, but that they will do something about it. The recent guidance issued by HMRC has been particularly harmful to the retail sector.
“However, we are intrigued as to the comment that the tax code does not need “major surgery”. Is this because cryptoassets will finally be deemed currency for tax purposes only?
“Cryptoassets are currently treated as intangible property for tax purposes. In our view, HM Treasury needs to consider the outcome from a tax collection and transparency perspective of (1) cryptoassets being deemed currency for tax purposes, (2) financial assets or (3) securities for tax purposes, and make a comparison with the current approach. If none of these categorisations are appropriate, consideration should be given to a separate piece of tax legislation for cryptoassets (e.g. akin to the intangible fixed asset regime).”