Things Can Only Get Brit-ter
The Bank of England has started a consultation on launching its own digital pound.
Despite many comments about “Britcoin” a digital pound would not be a form of cryptocurrency; although much of the discussion around wallets and access will be familiar to those who use crypto-assets, there would be no distributed ledger and the bank would maintain a core ledger of transactions. The digital pound would have lots of similarities with stablecoins in the sense that it is a digital asset that is fixed to the value of a real world object (in this case the value of the pound) (although of course in Sapiens, Yuval Noah Harari posits that all currency is a myth and that is what distinguishes human beings from other animals as far as we are aware is our ability to create, believe and share mythology).
The digital pound would give consumers access to central bank money – something they only currently have through physical currency; with bank deposits and debit cards being “private money” effectively a claim against a commercial bank.
The BoE’s consultation suggests that the digital pound could take many years to roll out, and whilst this is not a crypto-token, as the UK embraces more digitalised forms of finance that the crypto-space has opened up, those that deal with crypto perhaps can hope for more guidance from HMRC as to the tax treatment of crypto-assets.
Currently HMRC have provided a guidance note on crypto-assets for business, but one that deals primarily with exchange tokens.
To date, no substantial guidance on utility or security tokens has been produced. This can provide some difficulties, for example when employers and tax practitioners are reviewing crypto-tokens awarded in the course of employment, there is no clear guidance as to whether a security token is a security for the “employment related securities” rules. HMRC have confirmed that exchange tokens are readily convertible assets if trading arrangements exist (or are likely to exist) such that the token can be converted to monetary value. The lack of clarity therefore provides uncertainty to employers and employees as to the correct tax position.
As financial and technological innovation continue into the future, it is vital that tax payers are provided with certainty when dealing with their tax affairs. In an increasingly technologically nimble world a regulatory and taxation framework that is slow and unresponsive will increasingly lead to restriction in innovation and consumer choice and result in concerning uncertainty for those looking to utilise new developments.
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