Buying and selling cryptocurrencies is seen as a risky form of trading and it can lead some investors to worry about the legalities when trading on a cryptocurrency exchange.
This guide will explain what is and isn’t legal when it comes to crypto trading.
Can I buy crypto in the UK?
You can buy cryptocurrencies such as Bitcoin in the UK and in some instances you can get FREE bitcoin from crypto exchanges like Coinbase.
There are thousands of different crypto assets and retail investors or traders can research and purchase them through cryptocurrency exchanges.
Many investors could purchase Bitcoin and other digital assets through crypto ATMs up until March 2022 but UK regulator the Financial Conduct Authority (FCA) has said these machines do not have approval to provide these services.
It is still perfectly legal to purchase this asset class through a cryptocurrency exchange though.
The only restrictions you may find is with your own bank.
Some financial institutions have banned users from sending or receiving money from a cryptocurrency exchange.
This may mean bank transfers are not possible to add or withdraw money to and from a cryptocurrency wallet.
Banks have done this to protect users from scams and to limit their losses.
There is an argument that banks are worried about the decentralized nature of cryptos which can exclude financial institutions.
Some also say that people should be free to use their money as they wish as long as they understand what they are buying and take responsibility if they do lose funds.
Is cryptocurrency legal in England?
Cryptocurrencies are legal in England.
Some countries such as India and China have looked to ban Bitcoin purchases and other virtual currency transactions but England has no restrictions.
That means you can buy Bitcoin and other crypto assets in this country.
Cryptocurrencies are not recognised legal tender in England but some brands will accept them as forms of payment for goods and services.
They will only have real value once converted back into real or fiat currency though.
There are no rules about who can setup a cryptocurrency, which does create a high risk of scams.
Many of the founders of cryptocurrencies are based outside of England and it is important to do your research to check who is behind a virtual currency and its actual use and viability.
The only rules currently surrounding cryptocurrencies relate to anti-money laundering.
This applies more to cryptocurrency exchanges, which are supposed to check who is buying and selling cryptocurrencies and where the money has come from.
Is it legal to buy cryptocurrency in UK?
It is perfectly legal to buy cryptocurrency in the UK.
You need to find a crypto exchange that will let you buy Bitcoin or other forms of the asset.
You can then store your virtual asset in a cryptocurrency wallet.
It is best to purchase your digital asset from an exchange that follows UK cryptocurrency regulations.
Exchanges that facilitate cryptocurrency purchases as well as sales are supposed to be registered with the FCA for anti-money laundering purposes
This means approved platforms need to check who is buying and selling cryptos on their exchange and where the money comes from.
The FCA needs to be satisfied about these procedures and includes approved firms that you can check on its cryptoasset register.
You can also find a list of unregistered cryptoasset businesses on the Financial Services Register.
Another restriction you may find is from your bank.
Some won’t support cryptocurrency transactions so you may have to check with them first.
For example, Lloyds Banking Group and Virgin Money have both banned crypto purchases using their credit cards.
HSBC also won’t approve users who buy and sell Bitcoin and other cryptos through its accounts.
Is it legal to sell cryptocurrency in the UK?
As with any investing or trading, you may at some point want to sell your cryptocurrency.
This is also absolutely legal.
You need to check if your bank will let you receive funds from a cryptocurrency exchange otherwise it could be stuck in your digital or hardware wallet.
Owning Bitcoin and other crypto currencies does have some responsibilities though.
You may need to pay tax on your activity such as if you decide to sell Bitcoin or other assets in the crypto market.
There may be income tax on crypto trading.
For example, you may have to pay tax on a cryptocurrency you have mined unless they are worth less than £1,000 or you receive under £2,500 from other untaxed income.
An employer may pay you in crypto tokens such as Bitcoin.
This could be classed as a readily convertible asset by HMRC so could be liable for income tax and national insurance payments.
Additionally, you may need to pay capital gains tax when you sell all or some of your crypto holding.
You can check HMRC’s crypto tax guidance on the Gov.uk website.
Is it illegal to buy Bitcoin in UK?
Bitcoin is the oldest, largest and best-known cryptocurrency in the world.
Many people choose to buy Bitcoins as their first purchase in the crypto market as it is more familiar.
It is absolutely legal to buy Bitcoin in the UK and to trade other cryptocurrencies.
You will ned to check if your bank has any restrictions on dealing with crypto exchanges though.
Where can I buy crypto legally in the UK?
It used to be possible to buy cryptocurrency from Bitcoin ATMs.
They would let users deposit fiat currency to exchange for a Bitcoin purchase or to buy other cryptos.
However, these have been banned by the FCA as none of the current providers have regulatory approvals to offer ATM services.
Another route is to take part in an initial coin offering.
This is where a user helps fund the development of a cryptocoin or token.
You may get given a portion of or a whole token in return.
The main way to legally purchase cryptos in the UK is through an exchange.
A crypto exchange will list different types of tokens that you can research, buy and sell.
You will usually need to register and provide a name and email address as well as identity details for anti-money laundering purposes.
Once registered, you may need to make a GBP bank transfer to credit your account and you can then use this money for buying cryptocurrency.
You may also be able to use another payment method such as Apple Pay or a credit or debit card.
Buying crypto is risky and you should make sure you trust the exchange you are sending money to.
Using an FCA registered cryptoasset provider is one of the best security tips as they tend to cater more for UK users and will have procedures in place that have been approved by the regulator.
Is cryptocurrency trading legal?
Many cryptocurrency exchanges will also act as a trading platform where you can buy or sell tokens as well as crypto derivatives such as contracts for difference (CFDs).
Cryptocurrency trading is perfectly legal although is probably one of the riskiest forms of investment due to the volatile nature of the asset class.
Trading CFDs is also highly risky as it relies on price changes, which is can be very unpredictable in the crypto sector.
There is a possibility of large losses and even losing all your money.
It is important to understand this before even making your first Bitcoin purchase.
The returns may be higher but you need to ensure you understand and can afford to take the risk when getting involved with digital currency.
We also have a guide on what can influence cryptocurrency prices if you want to learn more.
Frequently asked questions
Is cryptocurrency legal in the UK?
Cryptocurrencies are legal in the UK.
Other countries such as China and India have tried to ban these digital assets but the UK government and regulatory approach is to inform consumers about the risks to help protect people from losses.
There are anti-money laundering rules that crypto exchanges have to follow when selling tokens.
The FCA is also working on financial promotions rules that would limit crypto trading to high net worth and sophisticated investors and those who certify that they understand the risks and pass appropriateness tests.
Can I get into trouble for buying Bitcoin in the UK?
How can I legally buy Bitcoin?
You can legally buy Bitcoin in a number of ways.
The traditional way was through Bitcoin mining.
This involved using complicated computer systems and high-powered software that solved computer equations and created a Bitcoin.
This is expensive and consumes a lot of energy though.
Alternatively, investors can now purchase Bitcoin and other cryptocurrencies using an exchange.
It can be pricey to purchase Bitcoin as its value has ranged from $40,000 to $68,000 in recent months but many exchanges will let you buy a portion of a token rather than a single one.
This can be a good way of spreading money around different digital assets to reduce your level of risk.
