UK Will Examine Crypto Taxes and Policies While the Chancellor Mints an NFT
Rishi Sunak, the new chancellor of the block, has stated his “ambition to establish the UK as a worldwide powerhouse for cryptoasset technology.”
“We want to see the companies of the future – and the jobs they generate – in the UK, and by successfully regulating, we can instil in them the confidence to consider and invest long-term,” Sunak stated, before adding:
“This is part of our strategy to keep the financial services business in the United Kingdom at the cutting edge of technology and innovation.”
Economic Secretary to the Treasury John Glen said today at the Innovate Finance Global Summit that the government would look at “improving the competitiveness of the UK tax system in order to stimulate further growth of the crypto-asset market” in the United Kingdom.
Additionally, they want to “examine how Defi loans — in which holders of crypto assets lend them out for a profit – are taxed.”
“The government will also consult on broadening the Investment Manager Exemption’s scope to include crypto assets,” the Treasury said.
Stablecoins will be regulated and designated as a “recognized method of payment.” Though they make no mention of regulation or recognized forms of payment other than proclaiming them lawful money.
Something that the US government would use for USDc or USDt. There are several sGBPs and the like, particularly in defi, so maybe they want to make their legal currency, which would be a significant step and perhaps the start of a race.
“The government will enact legislation to establish a ‘Sandbox’ for financial market infrastructure (FMI) that will enable firms to experiment and innovate in providing the infrastructure services that underpin markets, most notably by enabling the testing of Distributed Ledger Technology,” the Treasury says before adding some major spice:
“The government also indicated that it would launch a study initiative to assess the feasibility and possible advantages of deploying distributed ledger technology for sovereign debt instruments.”
Given that the United Kingdom creates and issues its own currency, it’s unclear how forward-thinking they’d be with such crypto bonds, as we’d refer to them, assuming they’re on a public blockchain like Ethereum.
However, if done correctly and on the public internet – public blockchains – rather than the intranet private blockchains, a token bond would expose these instruments, which remain mostly unknown to this generation for investing reasons, to millennials, and later zoomers as they mature.
Because it is a token, you can do everything that a token can do: collateralize it, auto-lend and borrow it, have code perform Yearn-style tactics on it, and flash loan it, all while still receiving interest from your own government, your own taxes.
The British government service can almost certainly pull it off, given they have been jumping puppies in the crypto space since 2014. However, whether they will really tip their toes in this manner remains to be seen.
The remainder is consultation. The FCA will host a ‘CryptoSprint’ in May to solicit input from industry players on “critical issues relevant to the creation of a future cryptoasset regime.”
We’d request that the restriction on crypto stock traded products, ETNs, and ETFs be lifted, as it makes no sense, as it is the only developed nation with such a prohibition, and as we are not children.
Additionally, the Economic Secretary will chair a Cryptoasset Engagement Group, which will “bring together important personalities from regulatory bodies and business to advise the government on challenges affecting the cryptoasset sector.”
Thus, a direct channel to Sunak and, perhaps more crucially, to the Treasury civil service, as the chancellor attempts to reclaim the domestic economic agenda, ostensibly with an emphasis on international competitiveness.
Germany is almost certainly watching, and we will likely see Europe’s reaction in due time, while US President Joe Biden has vowed a comprehensive government-wide approach to this issue, with nothing tangible in the interim while we await many reports.
From this vantage point, we have three jurisdictions competing at a potentially critical moment, as cryptos may be on the cusp of overcoming technical barriers to broad use.
Making it now allows them to prepare, and in a symbolic gesture, the UK will begin by minting an NFT this summer.
“Chancellor Rishi Sunak has requested that the Royal Mint construct an NFT for summer distribution. This decision demonstrates the forward-thinking approach we are committed to adopting in the UK with regards to crypto-assets,” the Treasury said.
This indicates they will purchase some eth, albeit a little amount, and will burn part of it. This essentially implies that the UK government will compensate each and every eth bearer with a minuscule amount of crypto pennies.
Every little bit matters, and in the case of crypto taxes or crypto bonds, it may matter a lot, depending on what they really disclose.