Tel. +44 (0)20 7287 4414
Tel. +44 (0)20 7287 4414
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

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Spearheading the intellectual battle against the EU. And for new thinking in international affairs.

Crypto Regulation in the EU vs the UK


Crypto regulations would have been identical for both the EU and the UK. However, the Brexit game brings chaos, and hence the crypto regulations, including the famous Bitcoin and Ripple, are independently defined, yet few sections overlap. This guide will bring some light on the cryptocurrencies regulations in the United Kingdom and European Union.

Cryptocurrency Regulation in the UK

In the post-Brexit financial landscape, cryptocurrency regulations in the UK have been modest. Although the UK confirmed that crypto assets are property, there are no laws for cryptocurrency, and they are not considered legal tender.

Bank of England states that since cryptocurrencies lack classical definitional qualities, they are not considered "money" and do not represent a systemic danger to the banking ecosystem. However, since crypto assets' legal consequences, regulations, and status may change based on their nature, type, and usage, the FCA and the Bank of England have issued warnings and guidelines concerning cryptocurrency. These warnings are for the lack of regulatory and monetary protection, the position of cryptocurrencies as stores of value, and the dangers of speculative trading and volatility.

Because of the regulatory ambiguity surrounding cryptocurrencies, the UK government established a specific task force in 2018. Before requiring extra AML/CFT and taxes considerations, the task force specified three categories of cryptocurrencies and three methods in which crypto assets are employed. HMRC issued a brief on the tax of cryptocurrencies, claiming that their "unique identity" means they cannot be compared to traditional investments or payments. Their "taxability" depends on the actions and parties involved. Capital gains tax is levied on gains or losses on cryptocurrencies.

Cryptocurrency Exchanges Regulations UK

The UK has already transposed the cryptocurrency regulation criteria outlined in 5AMLD and 6AMLD into domestic legislation. All UK crypto-asset firms (including recognised cryptocurrency exchanges, advisors, investment managers, and experts) with a presence or marketing product in the UK or offering services to UK resident customers must register with the Financial Conduct Authority (FCA) beginning January 10, 2021. Critically, these organisations must meet AML/CFT reporting and consumer protection obligations. The FCA emphasises that organisations engaged in crypto-related operations must also comply with the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017. Amendments to such regulations went into effect in January 2020, including the most recent FATF guidelines.

Including FCA licence requirements as part of the UK's cryptocurrency regulations has been controversial. To safeguard consumers from market volatility, the FCA declared in late 2020 that retail cryptocurrency derivatives would be prohibited from January 6, 2021. Following difficulty in registering crypto firms following the implementation of licencing regulations, the FCA adopted a "temporary registration regime" in December 2020 since it could not complete all registration applications. The provisional administration pushed the registration date to July 9, 2021.

Cryptocurrency Regulation in the EU

The regulation of cryptocurrency in the European Union differs based on individual member states. However, cryptocurrency is generally considered legal across the European Union. Cryptocurrency taxation varies as well. However, several member-states levy capital gains tax on cryptocurrency-derived revenues at rates ranging from 0% to 50%. The European Union's Court of Justice concluded in 2015 that conventional currency exchanges for crypto or virtual currency (and vice versa) constitute the provision of services but should be exempt from VAT.

The Fifth Anti-Money Laundering Directive (5AMLD) was brought to force in January 2020. 5AMLD puts cryptocurrency-fiat currency exchanges within the purview of EU anti-money laundering legislation, forcing exchanges to do KYC / customer due diligence on customers and to fulfil standard reporting criteria. 6AMLD went into effect in December 2020, making cryptocurrency compliance more stringent by adding cybercrime to money laundering predicate offences.

EU Exchanges Cryptocurrency Regulation

Cryptocurrencies are categorised as qualified financial instruments (QFIs) in the EU. Banks, credit laws, and investment firms are not prohibited by EU law from owning, getting exposure to, or providing services in crypto assets or cryptocurrencies.

Exchanges dealing in QFi's are regulated at the regional level, and firms may simply use their current QFi licences to supply cryptocurrency-related products and services. Firms must, however, adhere to an extensive range of EU cryptocurrency regulations and standards, including AML/CTF, CRD/CRR, EMD2, MiFID II, PSD2, compensation, margin, deposit, and sanctions obligations.

Exchanges must be registered with their respective authorities in some EU member states, such as Germany's Financial Supervisory Authority (BaFin), France's Autorité des Marchés Financiers (AMF), or Italy's Ministry of Finance. These regulators' authorisations and licences may then be " passports," enabling them to operate under a single system throughout the whole bloc.

Following in the footsteps of 5AMLD, 6AMLD has consequences for cryptocurrency exchanges. The directive makes legal persons as well as individuals liable for money laundering offences, which means that going ahead, the senior workers of crypto asset, currency, wallet, and exchange firms must have far greater oversight of their internal AML systems.

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Director : Robert Oulds
Tel: 020 7287 4414
Chairman: Barry Legg
The Bruges Group
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Founder President :
The Rt Hon. the Baroness Thatcher of Kesteven LG, OM, FRS 
Vice-President : The Rt Hon. the Lord Lamont of Lerwick,
Chairman: Barry Legg
Director : Robert Oulds MA, FRSA
Washington D.C. Representative : John O'Sullivan CBE
Founder Chairman : Lord Harris of High Cross
Head of Media: Jack Soames