Crypto exchanges in the UK are likely to face further pressure as they would be required to pay 2% tax under the digital services Act and this is mainly because the regulators have not yet decided on how to classify them.
Classifying the different types of crypto businesses has been proving to go be a big challenge for regulators all around the world over the last year or so as the growth, innovation, and expansion of the industry has pushed the authorities into action and they are now scrambling to regulate the industry in most cases while in some regions like China, they have decided to ban them outright. In those regions, including the UK, where the crypto industry is likely to be regulated, the modalities of doing so are still being worked out and this is causing a lot of confusion among the businesses and also the users in the meantime. Some of the platforms like Binance are now facing retrospective action and this has also left the users of the platform in the lurch.
This 2% tax mandate is also mainly because the regulators have not yet accepted the crypto exchanges as platforms that offer financial services. If they had been classified so, then they would be exempted from this tax but the failure to do so has forced the exchanges to be classified as entities that offer digital services and this tax has been imposed which has led to a lot of complaints from crypto enthusiasts. The regulators so far have adopted a hostile attitude towards the crypto industry as they believe that it helps people to carry out fund transfers and transactions that sit outside their purview and thus they help to finance many illegal operations.
This is the view of the regulators of the crypto industry so far and it remains to be seen what would happen in the coming months as they look to change their view and take a more inclusive outlook of the industry and bring in regulations so that it doesn’t affect the industry too much but at the same time, ensures that the financial transactions continue to be monitored by the respective authorities. It is a fine balancing act that the regulators need to perform in the coming months.
