The British public has shown keen interest in digital currencies – the London bitcoin meetup is possibly the biggest in the world and there are numerous other events and meetings being held in cities up and down the UK.
China Passes Law Protecting Cryptocurrency Inheritance
Unfortunately for UK businesses, this regulation has extraterritorial scope – it even applies to non-US businesses providing their services to US citizens.
Exchange tokens are intended to be used as a method of payment and encompasses ‘cryptocurrencies’ like bitcoin. They utilise DLT and typically there is no person, group or asset underpinning these, instead the value exists based on its use as a means of exchange or investment. Unlike utility or security tokens, they do not provide any rights or access to goods or services.
The FCA does not have any regulatory scope over cryptocurrencies, however its report could have an impact on future regulation. The body has previously issued consumer warnings on the risks involved with initial coin offerings (ICOs) - the process of crowdfunding new cryptocurrencies.
A trade in cryptoassets would be similar in nature to a trade in shares, securities and other financial products. Therefore the approach to be taken in determining whether a trade is being conducted or not would also be similar, and guidance can be drawn from the existing case law on trading in shares and securities.
In common law, “ all personal things are either in possession or action. The law knows no tertium quid between the two.” ( Colonial Bank v Whinney  85 Chi. D. 766). “Prima facie there is a difficulty in treating Bitcoins and other crypto currencies as a form of property: they are neither chose in possession nor are they chose in action. They are not choses in possession because they are virtual, they are not tangible, they cannot be possessed. They are not choses in action because they do not embody any right capable of being enforced by action…crypto currencies do not sit neatly within either category.” ( AA v Persons Unknown  6 WLUK 96).
The UK’s financial regulator will unveil its guidelines on cryptocurrency policy later this year, which could have global repercussions for how virtual currencies like bitcoin are regulated.
For once UK businesses were happy to have no regulation. We were told that VAT would most likely be charged on bitcoin service charges, but not bitcoin itself. Therefore an exchange would have to charge VAT on its commission, but not on the bitcoins traded.
Reasonable care should be taken to arrive at an appropriate valuation for the transaction using a consistent methodology. They should also keep records of the valuation methodology.
Cryptoassets are a relatively new type of asset that have become more prevalent in recent years. New technology has led to cryptoassets being created in a wide range of forms and for various different uses.