The regulation of cryptoassets in the UK has developed alongside the evolution of the technology itself. In 2018, the Cryptoassets Taskforce brought together HM Treasury (HMT), the Financial Conduct Authority (the FCA) and the Bank of England (the BoE) to coordinate the UK’s approach to regulating cryptoassets and distributed ledger technology (DLT) as it relates to financial services. Following this, in April 2022, the UK government expressed its intention to make the UK a global hub for cryptoasset technology and investment.
The sale of cryptoassets in the UK may be subject to sales regulations that fall into three broad categories: (i) the financial promotions regime; (ii) the Prospectus Regulation regime; and (iii) consumer protection and online/distance selling legislation.
- Where a cryptoasset meets the definition of a “specified investment” under the RAO (i.e., it is a security token), then it will likely fall within the traditional definition of “controlled investment” and therefore be within scope of the regime.
- The proposed “Digital Asset Rules” (DAR) introduced by the Financial Services and Markets Act (FSMA) 2023 will be used to establish prospectus requirements for non-security token cryptoassets, generally following the direction of the reform of the UK Prospectus Regulation.
- The ASA provides various standards as to how cryptoassets may be promoted and advertised. Among other things, these standards provide that advertisement should not be misleading or contain false information and should not imply that crypto investments are riskless, or low-risk, trivial decisions.
HMRC has confirmed that it considers cryptoassets to be property for the purposes of inheritance tax. UK-domiciled (or deemed domiciled) individuals (for tax purposes) are subject to UK inheritance tax on their worldwide estates. As such, cryptoassets will form part of the individual’s estate and will be subject to the standard inheritance tax rate of 40% (assuming the value of the estate exceeds the £325,000 tax-free threshold). The taxable amount on the cryptoasset(s) will be calculated on the individual’s death.Executors cannot claim for any rebate on cryptoassets.