Digital services tax targets crypto exchanges in United Kingdom

A new update to Her Majesty's Revenue and Customs(HMRC) guidelines has presented a digital services tax that will be levied on cryptocurrency exchanges operating in the United Kingdom.

Crypto exchanges in the UK will now have to pay a 2% digital services tax according to a Telegraph report. Britain's tax authority, HMRX, doesn't recognize assets as financial instruments and therefore exchanges are not able for financial exclusions.

On Nov. 28, the authority introduced cryptocurrency exchanges below the Treasury's tech tax. The digital services tax on income was presented in April 2020 focusing on social media and search giants such as Google and Facebook.

The latest blow to crypto exchanges is a result of the HMRC's classification of crypto assets, as the regulator explained, “There are a wide variety of crypto assets, each with different characteristics. It said that because cryptocurrencies do not represent commodities, financial contracts, or money, it is unlikely that crypto-asset exchanges can benefit from the exemption for online financial marketplaces.”

According to CryptoUK, the trade body representing the digital asset sector in Britain, the tax is unfair and is probably going to be investors and traders.

Lan Taylor is Executive Director that treating cryptocurrencies differently from other financial instruments, such as stocks or commodities is detrimental to the crypto sector.

He added that it is another heavy blow to the industry following the hard licensing system presented by the Financial Conduct Authority(FCA) for exchanges. Since January, all UK-based crypto-asset businesses have had to comply with AML(anti-money laundering) regulation and register with FCA.

The regulator imposed a ban on crypto derivatives in January, and in June, the FCA warned consumers against 111 crypto firms that had yet to register with it.

Britain's tax authorities reportedly demanded that several crypto-asset exchanges hand over details on customers from transactions and holding in August 2019.

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