The 15th issue of our legal round-up (29/11-06/12).
We continue with a series of weekly round-ups prepared by Mercuryo Legal Counsel Adam Berker to keep you updated on crypto regulations.
UK Digital Services Tax Targets Crypto Exchanges
According to the latest amendments to Her Majesty’s Revenue and Customs (HMRC) regulations, crypto exchanges operating in the UK will fall under Digital Services Tax, which means they will have to pay 2% tax on revenues gained in the UK. Many experts consider this a massive obstacle to the development of the crypto industry in the UK. Still, the situation needs to be clarified.
As outlined in the HMRC, the new tax obligations refer only to companies that gain more than £500 million, and more than £25 million of these revenues must be derived from UK users. If the company’s revenue exceeds these thresholds, the revenues derived from UK users will be taxed at a 2% rate.
Also, an allowance of £25 million suggests that the crypto exchange’s first £25 million of revenues (derived from UK users) will not be subject to Digital Services Tax.
Considering this, we may see that the new tax obligations do not apply to small and medium enterprises, so it will not affect their development. Furthermore, it is unlikely to become an obstacle for big corporations, and we should not expect them to raise their customer fees.
Russian Regulators vs Crypto
Russian Central Bank warned financial institutions about providing crypto services to clients. According to the Bank’s representatives, such services do not meet the interests of investors in the financial market and carry great risks.
This statement once again confirms the regulators’ negative attitude towards the crypto industry. Earlier this year, the Central Bank already issued an instruction for private banks to block cards involved in p2p deals. The same approach is followed by Vladimir Putin, who pointed out the high risks of digital currencies.
China’s Central Bank Proposes to Monitor Metaverse and NFTs
China’s Central Bank proposed regulating NFT and metaverses since these technologies may be used for money laundering and tax evasion. Some of the proposal’s provisions state that banks and payment services providing fiat-to-crypto gateways should identify both senders and receivers and monitor suspicious transactions.
Additionally, the proposal points out the importance of exploring supervisory sandboxes to study and evaluate the essence and nature of virtual assets.
This approach seems to correspond with standard practices of other countries that push forward crypto development but try to mitigate possible risks. Nevertheless, the latest total cryptocurrency ban showed that we should not expect any positive regulatory reforms from the authorities.
India Is Disclosing Its Plans on Regulation
The Indian news outlet NDTV obtained details of a circulating cabinet note on the proposed crypto bill. According to this note, the government plans to ban unlicensed and other wallets that do not verify their users. Also, Indian investors will be given a time frame to declare their crypto holdings and transfer them to exchanges regulated by the SEBI. On top of that, the Securities and Exchange Board of India (SEBI) will become the local crypto regulator.
Although the plan appears to be pretty straightforward, it is unclear how the government will make sure that people declare their savings, let alone prevent them from using unlicensed foreign wallets. After all, the apps that deal exclusively with crypto without involving fiat-crypto gateways are not that easy to track down.
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