Major crypto exchanges are going to be slapped with a digital services tax — and they'll have to stump up 2% of their annual revenues.
Major crypto exchanges are going to be slapped with a digital services tax in the U.K.
The updated rules will affect trading platforms with sales of more than £25m ($33m).
And it means that an additional 2% of their revenues will have to go to the taxman.
Financial marketplaces are usually exempt from these rules — but HM Revenue and Customs argues that crypto exchanges can't benefit because Bitcoin and Ether are not regarded as commodities or money in the U.K. According to The Telegraph, the taxman added:
"There are a wide variety of crypto assets, each with different characteristics."
Smaller trading platforms will be able to avoid this levy, but it's highly likely that bigger firms such as Coinbase will be affected. There are now fears these costs could end up being passed on to consumers — following in the footsteps of Amazon, Google and Apple.
The British government launched the digital services tax amid concerns that online marketplaces, social networks and search engines weren't paying their fair share. It's been described as temporary until the G-20 finalize measures to tackle tax avoidance on a global scale — and in July, proposals were unveiled that would set the minimum corporate tax rate of 15%.
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Crypto Groups Criticize the Move
Ian Taylor of CryptoUK has described HMRC's updated policy as "regressive" — and that it'll be everyday investors who are left out of pocket.
He went on to describe the licensing regime that was introduced by the Financial Conduct Authority as "arduous."
All of this could contribute to the U.K. being regarded as an unfriendly place for crypto companies to do business — prompting them to base their operations elsewhere.
Enthusiasts argue that an innovative approach to digital assets could boost the British economy, but companies currently face a lack of clarity.
Former chancellor Lord Hammond, who is now an advisor to the cryptocurrency start-up Copper, has told City A.M. that embracing this technology could give London a "post-Brexit advantage in financial services." He told the newspaper:
"I personally think the momentum is now unstoppable. We need to move quickly and effectively to secure London's position."
