Bitcoin exchanges operating in the UK do not have to register with HM Revenue & Customs (HMRC) under money laundering regulations, the government department has revealed.
In a letter to Joel Dalais, director of soon-to-launch exchange FYB-UK, HMRC suggested it was keeping a close eye on bitcoin and said it may decide to change its stance in the future on how the digital currency is regulated.
The letter from HMRC read as follows:
“With reference to your enquiry at this time there is no requirement to register with HMRC under the Money Laundering regulations, however HMRC recognise that the issuing of Bitcoins represent an emerging development.
We are currently in discussions with HM Treasury concerning this market and whether HMRC will be a Supervisor for this market. HMRC will be watching any developments relating to the Bitcoin market and may change our view, therefore I would suggest that you regularly check our news and update section on our website at www.hmrc.gov.uk/mlr and sign up for our e-mail alert system at www.uktradeinfo.com/AboutUs/Pages/EmailAlertServices.aspx.
If at any time HMRC recognise Bitcoins as a currency you would then have to register straight away without any prior correspondence from HMRC as this would be your responsibility to register should the ruling change regarding Bitcoins under the Money Laundering regulations.”
Dalais, who is also involved in the exchanges FYB-SG in Singapore and Sweden-based FYB-SE (currently in beta), said HMRC’s guidance gives the green light to bitcoin businesses within the UK, especially those operating as exchanges.
“Regulation will definitely come into play at some time in the future, so it is in the best interest of businesses that think they are transacting as a money services business to still keep anti-money laundering and know-your-customer practices in play so they’re prepared for when HMRC does come knocking,” he added.
Last month, a spokesperson from HMRC told CoinDesk that, while there is no specific regulation relating to digital currency, standard tax rules apply. This means those who receive bitcoin in return for goods and services will have to pay tax on any profits they make.
Meanwhile, in the US, the Bitcoin Foundation recently issued a response to the Cease and Desist order it was sent by the Department of Financial Institutions (DFI) in California, which suggested the foundation was operating as a money transmitter.
The foundation refutes these claims and also challenges the department’s view that bitcoin is a payment instrument.