UK to become global crypto hub

The government has announced a number of measures to help make the UK a global crypto hub, including:

1. Changes to the tax system;
2. New regulations on stablecoins; and
3. New non-fungible token (NFT) issued by the Royal Mint.

Changes to the tax system

The idea is to make the tax system work more easily for cryptoassets by:

• altering parts of the system to clarify treatment of DeFi (decentralised finance) loans and staking (concerning the tax consequences of lending or staking cryptoassets). Staking is akin to putting money in a high-yield savings account; and
• amending the investment manager exemption (IME) to remove disincentives to UK fund managers to include crypto in their portfolios (as it is currently uncertain whether transactions in cryptoassets are covered by the IME). The IME allows non-UK persons to hire UK investment managers to carry out investment activities without becoming subject to UK tax.

New regulations on stablecoins

The intention is to regulate stablecoins (a form of cryptoasset which aims to maintain a stable value relative to other assets). This development is designed to pave the way for stablecoins to be used in the UK as a recognised form of payment.

NFT issued by the Royal Mint

The Royal Mint has said that it will launch a range of NFTs this summer, and that as it is one of the world’s leading providers of premium collectables, it makes this ‘a natural progression for us’.

NFTs are usually linked to works of digital art, but the Mint has not yet shared what its NFTs will be based on.

The global NFT market reached $25.5 billion (£19.4 billion) in 2021 according to DappRadar, a firm that tracks sales, in a dramatic rise from $100 million in 2020.