In September this year, the UK government introduced a bill to Parliament that aims to protect digital assets, such as cryptocurrencies and non-fungible tokens (NFTs).
The Property (Digital Assets etc.) Bill will place digital assets in the same category as stocks, shares and bonds, for the purposes of law. If the proposed Bill passes into law, digital assets can be considered by the courts in the same way as physical assets of value, such as cars, houses, and jewellery. Given the current UK governments large majority in the lower house (the House of Commons), it seems likely it will become law in some form, although all government legislation in the UK is subject to amendment by Members of both Houses of Parliament either in House sessions or in committe stages.
The Property Bill would bring items like cryptocurrency holdings and NFTs into the official contents of, for instance, a deceased person’s estate, and therefore be subject to Inheritance Tax. Likewise it would give government bodies more leeway in considering a person or organisation’s income and assets for tax assessment purposes.
Further ethereal concepts such as in-game assets of value, email accounts’ contents, and carbon credits will also be affected by the new law. Tulip Sadiq, speaking at last week’s Tokenisation Summit in London, confirmed that ‘staking services’ will also come under the law’s remit.
Staking services apply to cryptocurrencies that have their value determined by proof-of-stake. Staking is when a holder of a specific currency (Ethereum, Solana and Cardano, for example) allows a portion of their funds to be committed to the general verification process of the blockchain’s transactions. This ‘lending’ of value earns the holder an income based on the amount staked. Staking is seen as a way that cryptocurrency owners can earn money on their assets, rather than simply leaving all funds to be hodl-ed in a wallet where its value is determined only by the market.
The law will also consider stablecoins to be effectively the same type of asset as a ‘traditional’ cryptocurrency. Stablecoins are cryptocurrencies that are pegged in value against a more stable, often more trusted measure, such as a national fiat currency.
By bringing more digital assets into the purview of the financial authorities and HMRC (the UK’s tax authority), cryptocurrencies and digital assets gain a greater measure of credibility for the general public. Conversely, for some traders and fund holders, there are significant personal and organisational tax issues that may not previously have been relevant.
The Tokenisation Summit attended by Ms. Sadiq was organised by a cabal of City of London trade associations and businesses to promote the scaling of tokenisation globally, and bring digital assets further into the portfolio of services offered by financial institutions.
The UK is seen as lagging behind the US and mainland Europe in digital assets. In many other territories, legislation and industry oversight of digital assets and cryptocurrency movement is better recognised and regulated.
See also: Kamala Harris urges US to lead in blockchain, highlighting ‘digital assets’
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