The UK Government Introduces Bill to Protect Digital Assets
In a significant move this September, the UK government has presented a bill to Parliament that is aimed at safeguarding digital assets, including cryptocurrencies and non-fungible tokens (NFTs).
The Property (Digital Assets etc.) Bill, as it is known, proposes to categorize digital assets in the same bracket as stocks, shares, and bonds under the law. If the bill successfully passes into law, digital assets will be treated by the courts in a similar manner to physical assets of value, such as cars, houses, and jewelry. With the current government’s substantial majority in the House of Commons, the bill is expected to become law in some form, although amendments by Members of Parliament are always a possibility.
The implications of the Property Bill extend to including digital assets like cryptocurrency holdings and NFTs in the assets of a deceased individual’s estate, making them subject to Inheritance Tax. Additionally, it will provide government authorities with more flexibility in assessing an individual or organization’s income and assets for tax purposes.
Moreover, the bill will also impact other intangible assets of value, such as in-game assets, email account contents, and carbon credits. Tulip Sadiq, speaking at the recent Tokenisation Summit in London, confirmed that ‘staking services’ will fall within the scope of the law.
Staking services pertain to cryptocurrencies that operate on proof-of-stake consensus mechanisms. This involves holders of specific currencies like Ethereum, Solana, and Cardano committing a portion of their funds to verify blockchain transactions, thereby earning an income based on the amount staked. Staking allows cryptocurrency owners to generate income from their assets, rather than solely relying on market fluctuations for value.
The bill will also equate stablecoins with traditional cryptocurrencies. Stablecoins are digital assets pegged to more stable measures, such as national fiat currencies, to maintain a steady value.
By bringing digital assets under the purview of financial authorities and HMRC, cryptocurrencies gain credibility in the eyes of the general public. However, traders and fund holders may face new tax implications that were previously irrelevant.
The Tokenisation Summit, organized by City of London trade associations and businesses, aimed to promote the global expansion of tokenization and integrate digital assets into financial institutions’ service portfolios.
Despite these advancements, the UK is perceived to be trailing behind the US and mainland Europe in terms of digital asset regulation. Many other jurisdictions have more robust legislation and oversight in place for digital assets and cryptocurrency transactions.
In conclusion, the Property (Digital Assets etc.) Bill represents a significant step towards recognizing and regulating digital assets in the UK. By providing legal clarity and tax guidelines for cryptocurrencies and other digital assets, the bill aims to instill greater confidence and transparency in the market.
Explore other upcoming enterprise technology events and webinars powered by TechForge here.