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The UK and its territories are great places for new digital businesses, such as mining, cryptocurrency exchanges, and electronic money
transactions. They are popular spots for blockchain startups and Initial Coin Offerings (ICOs). Alparanjo provides expert
help with registering and getting licenses to operate cryptocurrencies in the UK and other areas.

Today, the UK is seen as a great place to start cryptocurrency businesses, even though they don't need full government licenses right now.

Currently, cryptocurrency exchanges in the UK do not need government licenses, and there is no specific license for cryptocurrencies. However, a few years ago, the Financial Conduct Authority (FCA) started the Innovation Hub, which offers legal help to people involved in the crypto market. Registering with this hub is not required, which has caused some confusion about crypto licensing in the UK.

There is also no single, clear definition of a crypto asset in the UK. The UK Crypto Asset Task Force, which includes the FCA, Her Majesty’s Treasury (HMT), and the Bank of England (BoE), describes crypto assets as "digital forms of value or rights that are protected by cryptography, use distributed ledger technology, and can be moved, stored, or traded electronically." They identified three main types of crypto assets:

  • Exchange-traded tokens (like Bitcoin and Ether): These use distributed ledger technology (DLT) and are not backed by a central bank. They can be used as money or for investment.

  • Security tokens: These are considered “specified investments” and can offer rights like ownership or profit sharing. They are treated like securities under certain financial regulations.

  • Utility tokens: These can be traded for access to a specific product or service.

The FCA also mentioned another type of token called e-money tokens, which follow the rules set out in the Electronic Money Regulations (2018).

In 2021, Chancellor Rishi Sunak asked the Bank of England to research the idea of a central bank digital currency (CBDC), also known as a national cryptocurrency. This digital pound, informally called “Britcoin,” would allow people and businesses to hold accounts directly with the Bank of England. It aims to make payments faster and safer without replacing cash or current bank accounts. However, there is no formal decision yet to create a CBDC in the UK.

In April 2022, the Government decided to create new rules for crypto assets that address both risks and opportunities. A consultation paper was released on February 1, 2023, outlining proposals for these new rules. The goal is to make the UK a leader in crypto technology and innovation while ensuring that crypto service providers can operate safely and grow in the country.

Advantages of a United Kingdom Crypto license

Getting a crypto license in the UK has many benefits:

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Tax Benefits

The UK has low corporate tax rates (currently 19%). It treats cryptocurrencies as property, so you pay capital gains tax on profits from selling them, not currency tax. Plus, there’s no VAT on buying or selling cryptocurrencies.

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Easy Registration

Setting up a cryptocurrency company in the UK is straightforward. You can choose different types of business structures, like a limited company or an innovative business, depending on what fits your needs best.

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Access to Europe

Even though the UK is no longer in the EU, it still has good connections with European countries. Having a crypto license in the UK can let you operate in the European Economic Area without needing extra licenses for each EU country.

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Supportive Environment

The UK has a strong community for fintech and blockchain startups. There are many incubators, accelerators, and venture capital funds that help new cryptocurrency businesses, offering chances for networking and collaboration.

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Common Language

Doing business in the UK is easier because English is the main language. This helps you communicate better with partners and customers from around the world. The UK also has a stable legal system, which adds predictability to business operations.

Registration of a crypto company in the UK

To register a crypto business with the FCA, you need to provide the following information and documents:

1. To register a crypto business with the FCA, you need to provide the following information and documents:

  • Resumes of directors and shareholders showing their experience and qualifications.

  • A plan explaining the crypto activities your business will do.

  • A detailed business plan explaining how you’ll protect consumers and prevent money laundering.

  • A risk management plan showing how you will keep customers' funds safe.

  • A marketing plan outlining your customers and how you’ll reach them.

  • Details of your company’s structure and any outsourcing agreements.

  • Information on the IT systems your business will use, including security policies.

  • Details about your Anti-Money Laundering (AML) system, risk assessments, and staff training.

  • The public keys or addresses of your crypto wallets.

  • Information on your customer agreements and onboarding process.

  • Proof of how you’ll verify customer identities (due diligence).

  • Information on how you’ll monitor transactions.

  • Details of your record-keeping process.

  • Reporting on how you’ll handle money laundering.

  • Forms for the shareholders who own the company.

  • Fill out an application form and submit it to the FCA.

  • Pay a registration fee:

    • £2,000 (about US$2,599) if your company makes less than £250,000.

    • £10,000 (about US$12,990) if your company makes more than £250,000.

  • The FCA assigns a supervisor to review your application.

  • You may need to provide more information if the supervisor asks.

  • The FCA checks your application using other databases and regulators.

  • The FCA checks if your business meets the minimum requirements.

  • If approved, the FCA gives you authorization to operate.

  • You will get a letter explaining the type of authorization, when it starts, and any conditions.

  • You can withdraw your application at any time, but the fee won’t be refunded.

  • If your application is rejected, the FCA will explain why and refund the fee. You can reapply.

  • The FCA can cancel your registration if your company doesn’t follow the rules.

  • Authorized companies must pay an annual fee, which is based on their value and other factors. In the first year, the fee is adjusted based on how many months are left in the payment year.

Find more information about the
United Kingdom Crypto license

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Taxation of crypto currencies
in the United Kingdom

The UK doesn't have specific rules for cryptocurrencies yet, but the UK's tax authority, HMRC, has provided a guide on how to handle taxes for cryptocurrencies based on current laws.

Here are some key points about cryptocurrency taxes in the UK:

  • HMRC sees cryptocurrencies as assets, not money. The tax you pay depends on what you do with the cryptocurrency, like investing, mining, or trading.

  • Capital Gains Tax (CGT): If you sell or exchange cryptocurrencies for cash or other assets, you might have to pay CGT. This tax is based on the difference between what you paid for the cryptocurrency and how much you sold it for. There's a yearly exemption limit, and you need to report and pay this tax yourself.

  • Income Tax (IT): If you get cryptocurrency as payment for goods or services, it's considered income, and you will be taxed based on its market value when you receive it.

  • Mining: If you mine cryptocurrency, the value of the coins you earn is taxable as income, based on their market value when you receive them.

  • VAT (Value Added Tax): Buying and selling cryptocurrencies is usually free from VAT. However, if you exchange cryptocurrency for goods or services, VAT might apply.

  • Other Taxes: If you use cryptocurrency to buy things like shares or property, other taxes may also apply.

Since tax rules can change, it’s a good idea to check with a tax expert for the most current information on cryptocurrency taxes in the UK.

Any Questions

Frequently Asked Questions

In the UK, there isn’t an official license for cryptocurrency activities. Instead, there is a permit that doesn’t expire. However, companies must still follow rules and regulations set by organizations like the FCA. If they don’t meet these rules or if the rules change, they might lose their permit or have it changed.
There are several difficulties in getting a crypto permit in the UK. First, companies must meet strict rules about money laundering and customer checks, which can be complicated and take a lot of time. Second, they need to provide a lot of documents, like business plans and financial statements, which can be hard for smaller companies. Finally, the increased scrutiny from regulators and the long processing times for applications can make the process even tougher.
To operate a cryptocurrency business in the UK, you must register with the Financial Conduct Authority (FCA). This is not called a license, but it serves a similar purpose. To register, you need to submit an application to the FCA. This includes documents like a business plan, risk management policy, and information about key employees, along with an application fee. After reviewing your application, the FCA will decide whether to grant you the permit to operate in the cryptocurrency space in the UK.
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