Cryptocurrency Tax Status
On December 15, 2017, the European Council and the European Parliament finally agreed the 5th AML (Anti Money Laundering) Directive. This directive contains the first legally binding definition of virtual currencies and is the most significant regulatory action over virtual currencies anywhere in the world.
Because of a Swedish ruling a couple of years ago, upheld by the ECJ ( European Court of Justice) recently, virtual currency transactions are exempt from VAT according to the current EU laws and regulations. The binding force of case law of the ECJ is recognized without objection by all EU member states & courts i.e. virtual currencies are exempt from VAT across all jurisdictions of EU member states. At present UK does not recognise cryptos as either currency or commodity. It is certain the UK authorities will make a determination at some point in the future.
The UK leads in Fintech innovation, as the place to be for financial entrepreneurs; however, cryptocurrency regulation in the UK is behind others. All issuance of equity and debt are regulated by the FCA (Financial Conduct Authority) whose aim is seamless operation of financial markets, by providing protection for consumers and investors, plus promoting effective competition in markets. The FCA maintains that:
“cryptoassets designed primarily as a means of payment or exchange do not sit within the scope of FCA authority.”
While SEC and CFTC engage in crypto market regulation in the U.S, virtual currencies are mostly unregulated in the UK. The FCA doesn’t consider virtual currencies to be currencies or commodities under the MiFID II (markets in financial instruments directive) and, therefore, has no jurisdiction over them. It has authority over activities related to virtual currency derivatives such as bitcoin futures, options, or crypto-linked ETFs (if approved). The FCA’s position is ambivalent. On the one hand, the FCA never explicitly declared authority over security offerings in the form of ICOs/STOs, but on the other, it issues consumer warnings describing ICOs as “very-high-risk speculative investments” and unhelpful statements such as “Whether an ICO falls within the FCA’s regulatory boundaries or not can only be decided case by case.” Difficult to navigate that one…
Regulatory Authorities in the UK intend to apply AML regulations in order to comply with the EU’s 5th AML Directive. Along the same lines, the Treasury has revealed their intentions to regulate cryptocurrency traders, requiring them to abide by KYC (Know Your Customer) regulations and disclose their identities as well as report suspicious activities.
UK Tax with regard to virtual currencies
On tax though the UK is ahead of the game. In 2014, HMRC published guidance regarding the tax treatment of virtual currencies. The UK was one of, if not the first to have a clear legal position on the issue – albeit “for tax purposes only.” HMRC guidelines clarify that:
(i) mining income is not subject to VAT,
(ii) any loss or gain arising from the holding and/or selling of virtual currencies will be treated in the same way as gains made in other commodities or currencies,
(iii) virtual currencies acquired and held for personal reasons instead of speculative purposes will probably not be subject to capital gains tax.
You can compare this with buying a painting and sticking it on your wall rather than popping it into Sothebys. The UK authorities are under pressure to produce a comprehensive strategy on virtual currencies as soon as possible. Other EU countries are currently ahead in legislative support. Theresa May has suggested the UK might follow South Korea in banning anonymous trading and regulating exchanges.
Scotcoin leading the way on digital currency legislation
#We at Scotcoin are well ahead on all these matters. On a related note, the World Bank sees the further enhanced development of blockchain as fundamental to cryptocurrency development
For the past 2 years, Scotcoin has performed KYC checks on all purchasers via the official exchange. We wholeheartedly welcome better regulation – and are leading the way!
Bitcoin and other digital currencies are a “Wild West industry” and need to be regulated to protect investors, a committee of MPs has urged. | BBC News
– A speech by Temple Melville to Scottish Fintech on Wednesday 19th September 2018
“Good afternoon! I represent Scotcoin, Scotland’s own digital currency, a World Coin with a Scottish Ethos.
I have just three things to tell you about today, all of them important. One is potentially profitable for you, one will benefit all the people of Scotland and one will target individuals and groups in need.
But before I do that, does everyone here know what blockchain is? And do you know that blockchain is an enabling technology, that it can exist without Bitcoin or any other coin, but that Bitcoin could not exist without the blockchain? Scotcoin is on a blockchain – more a little later.
So number one, how will what I have said be profitable be for you?
A little history. Scotcoin began in 2013 and is now one of the longest-lived country crypto currencies. We presently sit on the Counterparty Protocol which makes use of the Bitcoin blockchain. The problem is this particular blockchain has several drawbacks. Not the least is that in the world of regulation that is coming to cryptos, there is no method for ensuring who is sending what to who. So we at Scotcoin decided a couple of years ago we had to do something different.
As you can see, Bitcoin can only do seven transactions per second. It takes 12 minutes to confirm a transaction, the cost per transaction when volumes are high is extremely volatile, and it uses more electricity than Denmark. None of that is very good.
Scotcoin, on the other hand, intends to move to its own permissioned blockchain shortly which will encompass KYC (know your customer) and AML (Anti-money laundering) to comply with all present and potential future regulations. We at Scotcoin are well ahead on this track – a committee of MPs has just published a paper daying that crypto currencies and Bitcoin in particular should be regulated.
You can see from the graphic which shows results from our testing that we should be able to do more than 50 transactions per second. We should also be able to confirm transactions in mere seconds, and the power usage should be infinitesimal in comparison to Bitcoin. If we can deploy our new blockchain with these parameters, Scotland will have another world beating industry.
We have several thousand holders of Scotcoin and have holders in more than 50 countries worldwide. On migration to our new blockchain, present holders of Scotcoin will be rewarded for their support by receiving a 4-for-1 bonus, an effective increase in value of up to 5 times.
Yes, you heard that right. I’ll repeat that. An effective increase in value of 5 times. That means if you have £10 of Scotcoin in its present form, in its NEW form you will have £50. So point one, that is how it will be profitable for you in the first instance, as long as you already have Scotcoin, or buy some very shortly.
In respect of point 2, we intend to occupy the social good works ecosystem and our plans are well advanced to do this. Scotcoin has been offered to the Scottish Government and discussions are ongoing. But in essence, the idea is that there will be established a commonweal fund that will be able to be used throughout Scotland to assist where the powers that be may not be able to step up to the mark. The point is that everyone in Scotland should benefit from this fund, and quite frankly this will be helping the Scottish economy to progress in the future.
And finally, point 3. I’m sure you’ve all heard of Social Bite and The Big issue. These organisations help people that have problems to get on their feet again. This is both our goal and our desire. I can think of no better future monument to Scotcoin than if people are able to say, Scotcoin eradicated homelessness in Scotland. And we are in good company here – Jeff Bezos has just announced a $2 billion fund to do exactly that.
So from all our perspectives, let’s pull together to make Scotcoin a World Coin, But with a Scottish Ethos.
And to be clear, what do we mean by a Scottish Ethos? Scotland has a long history of financial innovation and strong security for its money. We aim to keep to these traditions for Scotcoin. But the Scots also have a long and noble tradition of good works, charitable giving, of invention and forward looking. We aim to bring all these to bear by using Scotcoin in a way to enhance people’s lives right here in Scotland.”
If you are a chocoholic like me, you just might know that Belgium has been involved with the manufacture and sale of chocolate for nearly 400 years. Yes, 400 years. It has more than 2000 chocolate shops selling just – chocolate. They manufacture over 170,000 tons a year. It’s a big business. And it’s been growing for 400 years.
And that is actually the point here. It’s been growing for 400 years. What was it like after say…. 10 years? Around 1645……
Well, I’m not pretending I know exactly how much they produced, but I do know (from historical records) there were less than ten chocolate shops. So let’s just think what that means. In the last 373 years, the number of shops has grown from 10 to 2000. It represents an increase of just over 5 chocolate shops per year, every year, from then until now. That may not sound like much but look where it has ended up.
Now go back just say… 10 years from today. And hey, there’s this new thing called blockchain. And it does something called Bitcoin. And hey, usage, knowledge, and acceptance is growing.
My point is this blockchain business is absolutely in its infancy. It’s probably less accepted than chocolate was in Belgium after 10 years. From my point of view there is no contest between chocolate and the blockchain, but suppose blockchain grows as we all think it will.
All our present institutions and technology has had years to mature. Banks, as we know them, are 300 plus years old. The UK Parliament has been growing and evolving for more than 700 years.
So as regulators and central banks try to frame responses to where we are with blockchain and crypto currencies, let’s just reflect on how young this all is.
Let it grow. Let it evolve. Let it mature. And let it enrich – exactly has chocolate has done.
A Boston College research paper entitled Digital Tulips has found that fewer than half of all ICO projects survive more than 120 days after the completion of their sales of tokens to the public.
That is really scary. And this fact does not seem to be putting people off. Another $10-12 billion of ICOs will be out there during this year.
I was reflecting on the longevity of Scotcoin.
In the same way that most small businesses go bust within one to three years, it appears that ICOs ( ok it’s digital so it’s faster) go bust in 3-4 months.
It’s not surprising really. Most of them are designed as get rich quick schemes for the perpetrators with no economic or financial sense. That’s why some of the earlier coins and tokens have lasted – they have a purpose and a measurable impact, unlike their imitators. In the same way that it is said there are only 7 plots in total for literature, there may not even be 7 in crypto-currencies.
So Scotcoin, actually in existence for 5 years, is almost a granddaddy. In fact, in terms of country coins we might actually be the oldest – if anyone else knows better please let me know.
But I wanted to reflect on the words of an Economics Professor – Hyman Minsky. Being a true Keynesian myself – and believe me what we have had for a long time is NOT what Keynes said – I find Minsky’s idea of his Financial Instability Hypothesis extremely enticing. Basically he says on the economic upswing, people take greater and greater risks – until the bubble bursts and we end up back down at the bottom of the boom and bust cycle again. Sadly, Gordon Brown no more banished it than controlled it – and then made a mess of the Banks’ recapitalisation. In fact, it means we are on a treadmill we can’t get off. Digital money, espoused by Milton Friedman more than 20 years ago, has enormous attractions when all around is collapsing.
But Minsky said something very wise.
“Everyone can create money; the problem is to get it accepted.”
That’s what we are working on at Scotcoin.
We’ll buy your bitcoin for Scotcoin
Despite our new blockchain not needing Bitcoin, we will all need some Bitcoin in order to effect the migration from our present Counterparty Protocol.
It’s not very much per wallet but in order to send the existing coin to its new wallet, Bitcoin will be needed.
We are in the process of identifying those wallets where there is currently no Bitcoin. It is our intention that those that do not have any bitcoin in them will be sent enough to effect the migration.
To this end, we are making a special offer to people who HAVE some Bitcoin. If you buy Scotcoin for Bitcoin, we will give you a 15% discount to the present price on the exchange. The Bitcoin price will be at the GBP price as shown on Preev.com
If you would like to take advantage of this offer, please contact [email protected]
The news that US regulators are investigating crypto currency exchanges for illegal rigging activities should come as no surprise to anyone.
When you are in the Wild West, anything goes, and can go on for as long as no one pulls the plug on it.
But this particular move is all part of the worldwide efforts by regulators and central banks to bring some oversight and order to the crypto world. Think of the Wild West and how law and order came to it over a period once the abuses became so much that Washington got involved. The same is now happening with blockchain and crypto currencies – not a surprise to us at Scotcoin. We have been preaching about how regulation was coming and how this was a good thing for over two years now. Our new permissioned blockchain will handle all these requirements as a prerequisite.
What this also emphasises is how right we were to be happy to remove from Bittrex. The total speculation and pump and dump culture had no part in what we have been building.
There are still people who view cryptos as get rich quick schemes. Indeed I was looking at some exchanges on our Twitter (which please follow!) where someone was looking to buy something he could rapidly sell at a profit. That is actually counterproductive in terms of the evolution of digital currencies. If people are to have trust in them, they have to be sure of the value at any given point. Arguably, the worst offender is Bitcoin – A year ago $1000, Christmas $20,000, now $6500. How on earth can any business plan its forward sales and cash flows dealing with that?
Ideally you want a very slow and steady increase in price over time. Most people will by now have forgotten the German “Wirtschaftswunder” (Economic Miracle) of the 1950s ,60s and 70s. It is a given nowadays that Germany is one of the pre-eminent economies in the world. Not so after WW2 and into the early 60’s. Ludwig Erhard – the then German Economics Minister, equivalent to our Chancellor of the Exchequer – believed there was a way to guarantee economic growth. It wasn’t quantitative easing on a grand scale (as people seem to believe erroneously nowadays). He believed that what gave business the confidence to invest and grow was certainty. So he said categorically that the money supply would grow at 2% pa for the foreseeable future – no more and no less. And he stuck to that religiously for 20 odd years. He was so successful he ended up as German Chancellor.
We at Scotcoin have the same philosophy. We don’t want ups and downs destroying trade. We want trade to grow and grow with confidence, in the way that the German economy grew mightily from the 1950’s onward. If we could replicate that in Scotland we would, as the saying goes, be quids in.
Scotcoin In The News:
The Herald ran an interesting article on Tuesday on blockchains and potential future uses.
Bank of England Governor Mark Carney also name checked Scotcoin when talking about increased regulation for cryptocurrencies – he agrees with us, regulation is coming and it’s a positive thing for the industry.