Crypto Exchanges& Regulation in UK

Many or all of the products featured here are from our partners who compensate us. This may influence the products we write about, however, this does not influence our evaluations. Our opinions are our own.
6 min read
Top exchanges in UK by Coincub criteria
Article review author
Jonathan Lea
UK head image

Crypto Country Rating: 6.8/10

7.5/10
Institutional acceptance
Wide understanding of crypto across the establishment
9/10
Exchanges & Wallets availability
Most exchanges based in any country - total of 54
7/10
Government regulation
Legal to trade and mine
2/10
Defi acceptance
Blocked by the government, DeFi is illegal in UK
4/10
Financial services
Retail banks cautious of crypto services
9/10
Transparency
Personal data collection, government tracking
9/10
Spending crypto
Leading exchanges work globally.
7/10
Banks activity in crypto
Banks largely act only as facilitators in crypto acquisition

Bitcoin and cryptocurrency trading in UK

The UK scores a high rating of 6.8/10 thanks to the wide range of crypto services offered and ever-clearer guidance and transparency. As yet, the UK remains more of an investment center for crypto rather than a spending hub.

Law and crypto trading in UK

Legal - existing crypto legislation

Investing and trading in bitcoin is legal in the UK and there are an established number of leading crypto exchanges that make it easy and straightforward to buy, sell and invest in bitcoin (BTC) and other cryptocurrencies.  Cryptocurrency trading is regulated in the UK to prevent money laundering, although some types of crypto assets may be regulated depending on how they are structured.

Legal - forthcoming crypto legislation

The United Kingdom’s approach to cryptocurrency regulation has been measured and restrained. There are no specific cryptocurrency laws on the horizon and as yet cryptocurrencies are not considered to be ‘money’ or pose an immediate threat to the financial system overall. However, the Financial Conduct Authority (FCA) and the Bank of England do urge strong caution against the use of crypto assets, as they lack the usual protection surrounding accepted currency and are deemed highly volatile.

Taxing cryptocurrencies in UK

Income Tax

If you are a casual trader, the gains from your crypto trading will fall into the welcoming lap of capital gains tax, but not income tax, and any gains you are fortunate enough to make will be eligible for 20% CGT.  If you are a professional trader of crypto, your gains will be taxed as income and you’ll also pay income tax on interest received on coins that you lend out – even if the interest is received in the form of other coins. In all cases HMRC urges you to keep records and dates of all your transactions as penalties for tax evasion can be stiff – and ignorance will be no excuse (especially if you’ve been ignorant enough to make lots of money). When your cryptocurrency is used to buy goods or services, VAT will be due on those goods or services in the usual way.

Tax relief

In the eyes of the UK Government, bitcoin is largely unregulated and for taxation purposes, they are viewed in the same way as private money. So when your crypto is exchanged for a fiat currency, there will be no Value Added Tax (VAT) due on the value of bitcoin itself.  Also, while any profits and losses on digital currency trading in the UK are also subject to UK Capital Gains Tax (CGT), UK residents enjoy a useful allowance of up to £12,000, although this may vary if you live in Scotland or are domiciled outside the UK. On the plus side, your cryptocurrency holdings, if untraded and left in your wallet or exchange, won’t incur any tax until you make a disposal.

Tax when moving residency

Bitcoin is a global currency, and crypto exchanges and wallets operate across borders, however, as a permanent resident of any other country you’ll be taxed according to its requirements. If you change country but remain a UK-based citizen, you’ll be taxed in the UK.

Tax on mining

It’s highly unlikely that you will mine profitably for any of the major coins in the UK as mining requires massive computing power and energy expenditure. Given that, it is possible to mine newer coins and your returns from this activity (if they outweigh your mountainous costs) will be taxed as income, so you might be better off panning for gold.

Crypto financial services in UK

Fin services - retirement planning

You can invest your retirement cash into bitcoin, but in the UK it is not yet possible to invest your bitcoin directly into recognized retirement savings plans such as ISAs or SIPPs. Overall the retirement planning and pension industry views it as too risky, although there are examples of some asset funds investing in bitcoin on behalf of UK pension schemes.

Fin services - banking

UK mainstream or high street banks are not particularly crypto-friendly and view crypto as extremely high risk, often telling customers as much. However, while there are currently no high street banks dealing in crypto most will facilitate deposits and withdrawals from crypto exchanges.

Fin Services - DeFi

In the UK, as almost everywhere else on the planet, the huge implications, advantages, complications being brought about by decentralized finance (DeFi) and the emergence of blockchain technology have advocates and opponents from all across the financial system. In the UK the issue is a hot topic but as yet DeFi has not been adopted.

Using crypto in UK

Article step image 1
Spend

Paying directly by bitcoin is still not widely accepted by UK retailers, although worldwide brands that do accept them include Amazon, Microsoft and Starbucks. There are plenty of online retailers that accept it and in many cases it is possible to buy vouchers with your currency that may then be indirectly used with participating outlets.

Article step image 1
Gifting crypto

You can gift your crypto to an individual recognised charity. However, under existing capital gains tax rules, if you gift your cryptocurrency you will have to pay tax on any increase in the value of your cryptocurrency between the date you acquired it and the date of your gifting.

Crypto regulation in UK

Security

Light regulation has advantages but also some drawbacks. In terms of whether you get all your money back if your crypto assets are stolen or lost etc. very much depends on a case by case basis. Your crypto assets may not be protected by organizations such as the Financial Services Compensation (FSCS) unless they meet given criteria such as what type of financial product they are and whether they’re regulated. Leading exchanges carry insurance against loss through fraud or hacking etc, so this may be high up on your initial checklist.

Transparency

While direct regulation may be light, all UK crypto asset firms and cryptocurrency exchanges, advisers, investment managers, and professionals that operate on some level within the UK need to register with the Financial Conduct Authority (FCA). Most importantly they have to comply with Anti Money Laundering and Countering Financing of Terrorism (AML/CFT) reporting and customer protection obligations.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.