The United Kingdom has set its sights on becoming the global digital assets hub, and its first move is enforcing a tax break for foreign investors who purchase digital assets through investment managers based in the country.
The U.K. has fallen behind the more digital asset-friendly destinations like Singapore and Hong Kong and tax havens like Panama and the Bahamas as a digital currency hub. While the country still ranks highly for trading volume and local companies, foreign investors have been wary of its approach to the industry.
However, Prime Minister Rishi Sunak is working to make the country a Bitcoin haven. While he was the Chancellor of the Exchequer, he launched measures aimed at fostering the growth of the industry, including laying down plans to integrate stablecoins into the country’s payment system. He also called on regulators and legislators to consider legalizing DAOs and promised a revised taxation regime to favor Bitcoin.
Now the Prime Minister of Europe’s second-largest economy, Sunak has delivered on his taxation pledge. Through Her Majesty’s Revenue and Customs, Sunak revealed that the tax break would take effect on January 1.
In a statement to one media outlet, the tax agency stated that the new measures would build on the U.K.’s profile as a global investment hub:
“This exemption is an important factor in attracting global investors, meaning foreign investors won’t be brought into U.K. tax simply by appointing U.K.-based investment managers. To build upon the U.K.’s position as an investment management hub, this exemption has been extended to include crypto assets, so that funds which include them aren’t put off from appointing U.K. managers.”
While the government works to promote the growth of the industry, regulators have yet to catch up. Led by the Financial Conduct Authority (FCA), U.K. watchdogs have been restrictive towards the industry, with many companies failing to secure licenses to serve the country.
In November 2022, FCA’s CEO Nikhil Rathi told legislators that his agency had rejected 85% of the licensing applications in recent times “because we have not been satisfied that they would meet the standards that we believe are proportionate and reasonable.”
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