Is Bitcoin Legal in the UK?
There are no specific regulations governing the trading and investment of Bitcoin. However, UK residents are permitted to use Bitcoin for transactions.
Unlike El Salvador, which recognizes Bitcoin (BTC) as legal tender, cryptocurrencies are not considered currency in the UK. Instead, HM Revenue & Customs (HMRC) classifies cryptocurrencies as digital or crypto assets. Depending on the context, these may be subject to Capital Gains Tax or Income Tax.
Individuals can trade BTC through cryptocurrency exchanges (such as CEX.io in the UK, or global platforms like Coinbase or Binance) or via brokers like eToro. To register a cryptocurrency exchange in the UK, businesses must establish a legal entity, obtain a registered office address, open a commercial bank account, and register for taxes. After this, they need to apply for a crypto exchange license by completing an application form available on the Financial Conduct Authority (FCA) website and paying a registration fee.
So, can UK businesses accept Bitcoin? Yes, businesses can accept Bitcoin payments directly or indirectly through gift cards. However, this depends on whether the customer base prefers to pay with cryptocurrency or fiat currency.
Which Businesses in the UK Accept Bitcoin?
UK companies that accept Bitcoin include Lush, Etsy, Microsoft, Shopify, and CheapAir, among others.
Lush, a UK-based cosmetics company, accepts BTC payments to increase the number of globally available payment methods. But does Amazon accept Bitcoin in the UK? How can businesses accept Bitcoin payments?
Amazon does not directly accept Bitcoin payments. However, it is possible to purchase Amazon gift cards using Bitcoin payment service providers like BitPay and CoinGate. These gift cards can then be used for shopping on Amazon's UK website.
Similar to Amazon, Lush accepts crypto payments in the UK through BitPay. Users typically need to complete the following basic steps:
- Select BitPay at checkout.
- Get the BitPay wallet app or connect your preferred wallet.
- Choose Bitcoin from the available options.
- To complete the transaction, manually enter the transaction details or scan a QR code.
- Track your order in the wallet’s purchase history.
If someone wants to buy an Xbox gift card with cryptocurrency, they need to follow these steps:
- Download the BitPay app or BitPay extension.
- Select the gift card you wish to purchase.
- Decide the amount you want to load onto the gift card.
- Pay for your gift card using Bitcoin.
- After payment verification, you will receive the gift card immediately, usable on Microsoft Store, Xbox, or Windows.
Although Etsy does not have its own platform to accept Bitcoin as a payment method, independent merchants using Etsy are free to offer BTC as a payment option at checkout. Similarly, in the e-commerce world, Shopify allows online sellers to accept crypto payments in the UK.
Other companies like CheapAir, eBay, and Starbucks also accept BTC or other cryptocurrencies through Bitcoin payment service providers, following steps almost identical to those mentioned above.
What Can You Buy with Bitcoin in the UK?
Individuals can use Bitcoin payments to buy a cup of coffee, pizza, cosmetics, cars, mobile phones, and flight tickets.
Bitcoin debit cards, similar to prepaid cards, allow cryptocurrency enthusiasts to make payments using BTC. If a customer pays with BTC in person or online, the retailer receives payment in local currency (such as British pounds in the UK). Essentially, Bitcoin debit cards function like traditional credit cards for payment purposes.
Additionally, a UK-based prepaid cryptocurrency Mastercard called CoinJar Card can be used at any merchant website that accepts Google Pay or Apple Pay. Moreover, people can use their physical CoinJar card at locations that do not yet accept contactless payments.
Other popular ways to use Bitcoin in the UK include donating to charities, purchasing advanced mining equipment, or buying additional BTC or altcoins to diversify investment portfolios. However, according to the Financial Conduct Authority, anyone making Bitcoin payments in the UK is unlikely to benefit from the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS). This means that if issues arise with their purchases, they may not receive compensation or a resolution.
The Financial Ombudsman Service is a free and easy-to-use service that handles disputes between customers and companies offering financial assistance. Similarly, customers of authorized financial services companies are protected by the FSCS, which is the UK’s statutory deposit insurance and investor compensation scheme. This means that if a company is unable to pay claims, the FSCS may step in to provide compensation.
What Are the Pros and Cons of Accepting Bitcoin Payments?
Accepting Bitcoin payments is advantageous due to lower fees compared to credit and debit cards, an expanded customer base, and real-time bank balances. However, risks such as volatility and cybercrime can undermine these benefits.
Cryptocurrency payments help save on excessive credit and debit card processing fees because they are decentralized and do not require intermediaries to verify transactions. Additionally, merchants avoid overseas currency exchange fluctuations when payments are made in BTC or other cryptocurrencies.
High transaction speed is another benefit of accepting Bitcoin payments, allowing businesses to receive payments in real time. Furthermore, as customer demand for cryptocurrency payments continues to grow, offering Bitcoin as a payment method can help attract more shoppers.
However, accepting cryptocurrency payments carries tax implications for businesses. For example, any income from cryptocurrencies is subject to Income Tax: starting at 19% for Scottish residents, with intermediate rates of 21%, or ranging from 0% to 45% depending on the tax bracket in Wales, England, and Northern Ireland.
Another point to consider when accepting Bitcoin payments is the volatility of the crypto market. Unexpected changes in market sentiment can lead to sharp and sudden price movements.
Moreover, hackers can use tactics like phishing emails or redirecting victims to fake websites to steal funds from cryptocurrency wallets. Therefore, any business considering accepting BTC or other cryptocurrencies as a payment method should carefully evaluate the risks and rewards before making a decision.
Frequently Asked Questions
Is it legal for UK businesses to accept Bitcoin?
Yes, it is legal for UK businesses to accept Bitcoin. While cryptocurrencies are not considered legal tender, they are classified as crypto assets by HMRC. Businesses must comply with tax regulations and may need to register with the FCA if operating as a crypto exchange.
What are the tax implications of accepting Bitcoin?
Income from Bitcoin payments is subject to Income Tax or Capital Gains Tax, depending on how the assets are held. Businesses must maintain accurate records of transactions and report them to HMRC to ensure compliance.
How can businesses mitigate the risks of Bitcoin volatility?
Businesses can use payment processors that instantly convert Bitcoin to fiat currency, reducing exposure to price fluctuations. Additionally, treasury management tools can help hedge against volatility.
Are Bitcoin transactions secure?
Bitcoin transactions are secured by blockchain technology, but businesses must implement robust cybersecurity measures to protect against phishing, hacking, and fraud. Using reputable payment processors adds an extra layer of security.
What payment processors support Bitcoin in the UK?
Popular payment processors like BitPay, CoinGate, and Coinbase Commerce support Bitcoin transactions for UK businesses. These services handle conversion and compliance, simplifying the process for merchants.
Can customers get refunds for Bitcoin purchases?
Refunds in Bitcoin are possible but can be complicated due to price volatility. Many businesses prefer to issue refunds in fiat currency or store credit to avoid complications.