Crypto assets are becoming increasingly important in both the global and the UK’s economy, affecting how financial transactions are conducted daily.
A quick look at Finder.com’s 2024 cryptocurrency report shows that 13% of Brits own some form of crypto asset, primarily cryptocurrency, and that number is still on the rise.
Also, the current market cap of Bitcoin on the London Stock Exchange is about $1.2trillion, which makes cryptocurrency one of the most valuable assets listed by the exchange.
If you live in London or anywhere else in the UK and are looking to diversify your portfolio or invest in something different, crypto assets or cryptocurrencies might be a really good option.
However, it is important to know about the regulations surrounding this form of investment.
So, let’s explore what cryptocurrencies are, how to start investing in them, and some of the current regulations guiding this type of investment.
Understanding cryptocurrency investments
Cryptocurrency is a major type of crypto asset that is best described as a digital form of currency built on a decentralised network of computers called the blockchain.
Over the years, cryptocurrencies have grown in popularity and have become easily accessible to anyone willing to invest in the growing market.
Today, there are many ways to invest in cryptocurrencies, but several are either too complicated or require deeper technical expertise.
The easiest way is to start investing on exchange platforms.
In the UK, the Financial Conduct Authority (FCA) primarily regulates crypto exchange platforms.
As someone looking to invest in crypto, it is in your best interest to invest with an FCA-registered institution that complies with the set regulations, such as the OANDA Crypto trading platform.
This way, you save yourself many headaches and hassle knowing that you’re dealing with a reliable, trusted, and law-abiding company.
How to start investing
Here’s everything you need to know to start investing in cryptocurrency right now.
Keep in mind that the exact steps may vary depending on the exchange platform you choose, but the process generally looks like this.
1. Register with an approved cryptocurrency exchange
To start investing in the cryptocurrency market, you need to find a reputable, FCA-registered and easy-to-use crypto exchange platform and create an account.
This typically involves verifying your identity and setting security measures like a password and two-factor authentication.
2. Deposit money into your new account
After creating an account, you must deposit funds (GBP or other) into your exchange account via a bank transfer, debit or credit card, or other method.
Some startups in London and other parts of the UK provide services to make this process seamless.
PLEASE NOTE: It is advised that all investors only invest money they can afford to lose.
3. Research your cryptocurrencies
As of 2024, there are over 13,000 cryptocurrencies in the market, with Bitcoin being the most popular and most valuable.
Doing your own research ensures that you know what you are investing in, which is an important rule in any kind of investment.
There are trusted resources such articles, videos, and podcasts which can keep you informed about investment opportunities.
4. Lock in your investment
After doing proper research, use the funds you deposited in step two to buy your desired cryptocurrency on your exchange account.
5. Set up a crypto wallet
After buying your cryptocurrency, you can either leave your new crypto asset on the exchange platform or move it to a crypto wallet.
There are different types of crypto wallets, each with unique features and benefits that will appeal to different needs.
However, the whole point of having a crypto wallet is to move your crypto asset to a more secure place.
Before choosing a wallet, it is important to make sure it’s one that you can trust.
Your tax obligations
As an investor in crypto, you are expected to pay taxes on your investments.
Crypto tax generally refers to the taxes you are obligated to pay on the profits, income, and transactions involving your crypto assets.
In the UK, the His Majesty’s Revenue and Customs (HMRC) is responsible for overseeing crypto asset taxation, making sure investors pay their fair share.
However, the laws around crypto taxes are complex and still evolving.
Therefore, it’s always a good idea to consult a professional tax advisor to understand your specific obligations.
That said, as of 17 November 2024, you are obligated to pay taxes in one of these two brackets:
Capital gains tax (CGT)
These are taxes applied to the profits you make when buying, holding, and selling crypto assets on your individual account.
Additionally, profits above the £3,000 annual exemption are taxed under CGT.
Income tax
This applies if you receive crypto as payment for services or employment.
It could also apply if you earned crypto through mining, staking, or airdrops.
Be sure always to stay informed and ensure you’re meeting your tax responsibilities.
Three practical tips for compliant crypto investing
Apart from fulfilling your tax obligations, here are three additional tips to ensure that you comply with the regulations surrounding crypto investment.
1. Complete your KYC
Submitting personal identification documents, such as a passport or driver’s licence, should be done to confirm your identity and prevent fraudulent activities.
Not doing this may lead to the closure of your exchange account, frozen funds, or even the exchange facing penalties.
All these ultimately affect your ability to trade.
2. Record-keeping and tax reporting
You need to keep a very detailed log of every transaction, including purchase dates of currencies, amounts, wallet addresses if you use one, and exchange rates at the time of trade.
For your annual self-assessment tax return, you should declare all taxable events, including losses and gains on your crypto assets.
3. Foreign holdings and declarations
If you hold any crypto assets overseas, you must declare them on your self-assessment tax return as foreign income or capital gains, depending on the circumstances surrounding them.
The bottom line
In the UK, the crypto investing landscape is growing at an incredible rate, and it is one of the most valuable assets on the London Stock Exchange Market.
Staying compliant with regulations as a crypto investor is non-negotiable, and it doesn’t have to be complicated.
All you have to do is follow tips like choosing an FCA-registered platform, keeping detailed records of your crypto asset transactions, and staying informed about the latest rules.
With that, you can remain ahead in this volatile market.
