With the further improvement of the UK government regulations and the rapid growth of the financial services industry, the UK region that has been committed to the legal and compliant cryptocurrency has taken the lead in many cryptocurrency markets.

Author: MIIX Capital

Preface

The UK is at the forefront of cryptocurrency regulation. In the UK, investing in Bitcoin and other cryptocurrencies requires the use of platforms that comply with the regulatory guidelines of the Financial Conduct Authority (FCA). The UK also regulates stablecoins according to the country's payment rules and has established market abuse systems to protect investors.

As the second largest economy in Europe and a global financial center, cryptocurrency-related trading services and technological applications are more standardized and mature. With the economic shock after Brexit, more and more young people, high-income groups, and educated individuals are inclined to invest more resources in cryptocurrency. This has led to the emergence of a large number of cryptocurrency users in the UK and provided an extremely friendly environment for cryptocurrency companies to grow.

1. Regional Macroeconomic Indicators and Current Situation

The UK is located on the British Isles in the northwest of the European continent, surrounded by the North Sea, the English Channel, the Celtic Sea, the Irish Sea, and the Atlantic Ocean. The land area is 244,100 square kilometers (including inland water). The UK is divided into four parts: England, Wales, Scotland, and Northern Ireland, with London as the capital. England covers an area of 130,400 square kilometers, Scotland 78,800 square kilometers, Wales 20,800 square kilometers, and Northern Ireland 14,100 square kilometers. With a population of over 67 million, it is the sixth largest economy in the world, after the United States, China, Japan, Germany, and India.

1.1 GDP Far Exceeds the Global Average

The UK is a highly developed country and one of the four largest economies in Europe. Its citizens have a very high standard of living and a good social security system. The UK is the world's largest net exporter of financial services, and its position as a global financial center is still difficult to shake in the short term. In 2022, the UK's Gross Domestic Product (GDP) was $3.07 trillion, accounting for 1.32% of the world economy. The per capita GDP is $47,232.27, equivalent to 374% of the world average, with London having the highest GDP in Europe. However, in terms of global per capita GDP ranking, the UK ranks 21st, relatively lower compared to Western European developed countries such as Germany or Austria.

1.2 The Service Industry's GVA Accounts for as Much as 80%

According to the UK's Office for National Statistics (ONS), the service industry is the largest industry in the UK, accounting for 80% of Gross Value Added (GVA), a measure similar to GDP. The UK's service industry includes numerous sectors such as financial and business services, as well as consumer-centric industries such as retail, food and beverage, and entertainment. The other two major contributors are the manufacturing and construction industries, contributing 10% and 6% to the UK's total economic output, respectively. Agriculture accounts for about 0.67%.

1.3 Affected by Brexit, Inflation Rate Fluctuates Significantly

In October 2023, the UK's inflation rate dropped from 6.7% in September and August to 4.6%, lower than the market's expected 4.8%. The UK's inflation rate has rebounded from around 10% earlier this year.

The UK's inflation rate was higher than the Eurozone's inflation rate last year, and even this year, in 2023, the UK's inflation rate is expected to remain on par with the Eurozone's. Brexit is one of the main reasons for the high inflation rate in the UK, as import costs have risen, and the European energy crisis caused by the Russia-Ukraine conflict in 2022.

2. Characteristics of UK Cryptocurrency Users

According to the latest data from the United Nations compiled by Worldometer, as of Sunday, December 17, 2023, the current population of the UK is 67,840,640. According to TripleA's estimate, there are currently 4.2 million people in the UK who own cryptocurrency, accounting for 6.2% of the total population.

2.1 High-Income Groups Are More Willing to Invest in Cryptocurrency

Data shows that the wealthy hold more cryptocurrency. Among the surveyed UK residents who own cryptocurrency, 40% earn over £200,000, with 18% earning between £100,000 and £200,000. The nature of cryptocurrency attracts those with a large disposable income and a willingness to take high-risk investments.

2.2 Young People Prefer Investing in Cryptocurrency

The majority of cryptocurrency holders in the UK are in the 18-34 age group (56%). Only 4.6% are aged 55 and above. This indicates that cryptocurrency is primarily owned by young people in the UK.

2.3 Most Cryptocurrency Investors Are Highly Educated

Cryptocurrency holders in the UK are highly likely to have received higher education, with 46% holding a bachelor's degree or higher. The survey results indicate that cryptocurrency users in the UK are mainly educated young people, and therefore have a higher acceptance of new technologies. At the same time, they are willing to accept the risk of cryptocurrency because they have a longer investment horizon than middle-aged and elderly people.

2.4 BTC Remains the Preferred Cryptocurrency for Investors

Bitcoin remains the top choice for cryptocurrency holders in the UK, with over 62% of surveyed cryptocurrency holders owning Bitcoin. Ethereum follows closely due to its wide range of use cases, ranking second, followed by Ripple (XRP), Tether (USDT), and other currencies.

2.5 38% of the Population Plans to Increase Cryptocurrency Investments

The British population is optimistic about cryptocurrency. Since 2021, major institutions, celebrities, and public figures have joined the cryptocurrency craze, and Bitcoin and other cryptocurrencies have reached historic highs. Over a third of surveyed UK respondents (38%) stated that they plan to increase their cryptocurrency holdings in the coming years.

2.6 Anticipating Greater Cryptocurrency Adoption and Education

The majority of non-cryptocurrency respondents (70%) stated that they do not own cryptocurrency due to a lack of relevant knowledge, indicating that there is great potential to increase the adoption of cryptocurrency through appropriate education and awareness raising.

In addition, 24.9% of respondents stated that the reason for not owning cryptocurrency is because current merchants do not accept cryptocurrency. Therefore, the adoption of cryptocurrency payment methods by more merchants would create a network effect, leading to faster adoption of cryptocurrency among the public.

3. Regional Preferences for CEX in the UK

In the UK, investing in Bitcoin and other cryptocurrencies requires the use of platforms that comply with the regulatory guidelines of the Financial Conduct Authority (FCA). These authorized exchanges allow investors to deposit British pounds (GBP) through local bank transfers, fast payments, debit cards, credit cards, and other payment methods.

3.1 eToro: The Best Cryptocurrency Trading Platform in the UK

eToro, headquartered in the UK, is the best cryptocurrency platform in the UK, providing investors with access to a wide range of assets, including cryptocurrencies, stocks, commodities, currencies, indices, and ETFs. The platform stands out with its advanced social trading features such as copy trading and virtual accounts, allowing users to practice with £100,000 in simulated funds.

eToro has over 30 million investors in the UK, Europe, and globally, making it the largest broker in the UK. It is the safest and most regulated digital asset buying and trading platform. British investors favor eToro due to its user-friendly and efficient British pound deposit options, such as fast payment services, UK online banking services, debit cards, and other popular methods. Additionally, eToro offers competitive fees, zero initial commissions, and industry-leading asset spreads.

3.2 Uphold: The Second Best Trading Platform after eToro

Uphold, located in London, is the second largest cryptocurrency exchange in the UK, offering buying, selling, and collateral services for over 250 digital assets, regulated by the Financial Conduct Authority (FCA). As an alternative to eToro, Uphold allows quick and affordable deposits in British pounds through bank transfers, fast payment transfers, debit cards, and credit cards.

Datawallet.com rates Uphold as the best alternative to eToro in the UK, as they are one of the few exchanges that provide audited proof of reserves, demonstrating real-time data on how they protect customer funds and proving that they always fully support a 1:1 ratio. This transparency makes them one of the safest and most reliable exchanges nationwide.

3.3 Kraken: Committed to Providing an Excellent User Experience

In the competitive cryptocurrency landscape in the UK, Kraken ranks third overall in the UK, catering well to the diverse needs of the UK market. With its increasing quarterly trading volume, Kraken's popularity is also on the rise. It provides a robust platform supporting the trading of over 250 cryptocurrencies, including well-known assets like Bitcoin, Ethereum, and Litecoin, as well as numerous emerging tokens.

Kraken is committed to providing an excellent user experience, with its highly-rated mobile application available for download on the App Store and Google Play. In the UK, customers appreciate the platform's lucrative collateral services, offering the opportunity to accumulate up to a 25% annual return (APY). Additionally, Kraken Pro, as the exchange's professional trading feature, provides impressive services for UK traders and institutional users, offering narrow spreads, high liquidity, and high deposit limits, solidifying its position as the preferred choice for investors.

3.4 Gemini: Exclusive NFT Trading Market

When it comes to trusted cryptocurrency exchanges in the UK, Gemini is a standout. It has gained recognition for its commitment to trusted, secure, and transparent financial operations, all in line with the guidance of the Financial Conduct Authority (FCA). Notably, Gemini was one of the first exchanges to be registered with the FCA in August 2020, highlighting its commitment to compliance and security.

Gemini meets the diverse needs of a wide user base in the UK by offering a diversified portfolio of over 100 cryptocurrencies. Gemini also owns Nifty Gateway—a leading NFT marketplace, providing a seamless experience for buying, selling, and storing non-fungible tokens. The Gemini ecosystem includes a mobile application, trading platform, active trader interface, digital wallet, clearinghouse solutions, and regulated stablecoins, reflecting best practices in security, regulatory compliance, user experience, and investor protection.

4. Web3 Projects in the UK Region

London is a renowned global financial center with numerous financial technology companies. With the rapid development of the cryptocurrency market, it has also become a hub for Web3 startups, leveraging its status as a global financial center to drive innovation in cutting-edge technologies such as blockchain and decentralized technologies. Based on London's evolving tech ecosystem, entrepreneurs find it easier to connect with talented founders and partners.

4.1 TokenOPS: Bringing Simplicity and Transparency to Token Management

TokenOPS is an early-stage project supported by a registered entity in London and trusted by 1inch Network. TokenOPS allows Web3 startups to visualize, manage, and create lockup plans and finances, providing transparency to investors and the community. The platform has two main sections: one for project founders and another for investors.

Need to issue tokens or track existing lockup plans and token tables?

URL: https://tokenops.xyz/

4.2 Bull Project: HR and Payroll Solutions

They help companies recruit, hire, manage, and pay remote workers using Web3 and blockchain technology in a fully decentralized manner, including paying cryptocurrency wages.

URL: https://testing.bullproject.io/

4.3 Client Fabric: A Verifiable Certificate Application

They are building a verifiable certificate mobile application and platform (using decentralized identity) that allows businesses and clients to verify the certificates and skills of professionals who provide services to them. While it can be extended to all professions, and this is also part of their roadmap, they believe the biggest gap is in the field of Anti-Financial Crime (AFC) due diligence professionals.

URL: https://www.clientfabric.com

4.4 Reef Chain: A Compatible EVM DeFi Public Chain

Reef Chain is the most advanced EVM-compatible blockchain with self-upgrade and on-chain governance capabilities. Its infrastructure also allows EVM extensions to support native token bridging, scheduled calls (e.g., recurring payments), and internal code upgrades for smart contracts. In the near future, it will also support another virtual machine, allowing developers to write code in multiple programming languages.

URL: https://reef.io/

5. Cryptocurrency Investment Institutions in the UK

London's leading position in the financial sector seamlessly extends to the Web3 and cryptocurrency fields. London has a strong ecosystem that uniquely integrates financial intelligence, tech talent, and regulatory frameworks, conducive to fostering innovation in the blockchain and Web3 domains. Therefore, London has become a popular destination for venture capitalists looking to support the next wave of disruptive Web3 technologies.

5.1 Outlier Ventures

Founded in 2014, Outlier Ventures is a forward-thinking cryptocurrency investment fund dedicated to driving the open Metaverse. Their vision goes beyond traditional cryptocurrencies, aiming to seamlessly integrate blockchain, artificial intelligence, and Web3 technologies. Outlier Ventures is at the forefront of developing decentralized platforms and supporting tools for various applications, covering areas from the Internet of Things to artificial intelligence and virtual reality. Their supported notable projects include Polkadex, IOTA, Brave, ChainLink, and Cosmos.

5.2 Fabric Ventures

Founded in 2017, with offices in London and Luxembourg, Fabric Ventures focuses on investing in technologies driving Web development. They collaborate with entrepreneurs to promote innovative business models and provide seed funding when startups are ready to achieve growth. Fabric Ventures invests in areas related to blockchain and cryptocurrencies, with a diverse portfolio including Ramp, Sorare, Nansen, 1Inch, Argent, Aurora, and Polkadot.

5.3 Metaverse Venture

Metaverse Venture is a subsidiary of DCG (wholly owned by DCG) specializing in investing in companies developing Decentraland products and services. Their portfolio includes Decentral Games, Vegas City, Metalith, and Artie, among others.

5.4 Moonrock Capital

Moonrock Capital is a native crypto advisory and investment firm that has been incubating and accelerating early-stage startups since 2019. They primarily support the mass adoption of infrastructure, middleware, DeFi, and dApps in the Web3 landscape. Their notable projects in the investment portfolio include Polkstarter, Ngrave, Manta Network, and Thorchain.

6. Cryptocurrency Regulatory Policies in the UK

After the EU's MiCA regulation, the UK gradually included cryptocurrencies in its existing regulatory framework and regulated cryptocurrencies under the Financial Services Market Act, establishing an authorization system for digital asset companies. Additionally, the UK also regulates stablecoins according to its payment rules and has established market abuse systems to protect investors. The Financial Services and Markets Bill has been progressing in Parliament, granting regulatory agencies the authority to oversee cryptocurrencies and expanding the rules for financial instruments.

6.1 Regulatory Progress on Cryptocurrencies in the UK

• In January 2018, the Financial Conduct Authority (FCA) announced the regulation of cryptocurrency exchanges and ICOs.
• In March 2018, the UK Treasury released a report stating that the tax treatment of cryptocurrencies is similar to traditional assets.
• In January 2019, the FCA issued documents providing specific regulatory rules for cryptocurrency exchanges, ICOs, and cryptocurrency funds.
• In August 2020, the UK government released a consultation paper and proposed regulatory policies for stablecoins and DeFi (decentralized finance).
• In January 2021, the FCA announced that all cryptocurrency businesses need to register and be regulated.
• In April 2022, the UK government pledged to create conditions suitable for the development and scaling of cryptocurrency and digital asset businesses.
• In August 2022, the All-Party Parliamentary Group (APPG) on Cryptocurrency and Digital Assets launched its first inquiry.
• In July 2023, the FCA issued a proposed guide on social media financial promotions targeting meme promotion and KOLs.
• In August 2023, the FCA issued "travel rules" requiring crypto asset businesses to collect, verify, and share information about crypto asset transfers.

It can be seen that in recent years, the UK government and regulatory agencies have been working to improve regulatory measures for the cryptocurrency market. Due to the rapid changes in the cryptocurrency market, regulatory policies are continuously being adjusted and updated.

6.2 Requirements for Promoting Cryptocurrency Operations in the UK

Starting from October 8, 2023, companies operating and engaging in cryptocurrency-related businesses in the UK will be strictly regulated in promoting cryptocurrency assets to comply with FCA regulations. These measures include:

• Obtain approval or convey promotional activities from the authorizing party.
• Create promotional activities by companies registered with the FCA.
• Promotional activities eligible for exemption under the UK Financial Services and Markets Act.
• According to the FCA, promotional activities include websites, mobile applications, social media posts, and online advertisements that "have an effect in the UK" and are not limited to companies headquartered in the UK.

6.3 Tax Policies on Cryptocurrency in the UK

In the UK, Her Majesty's Revenue and Customs (HMRC) applies different tax regulations to cryptocurrencies based on the nature of the related activities. Cryptocurrencies held as investments are subject to a 20% capital gains tax, taxing the profits and allowing potential losses to be offset against other capital gains. Transactions classified as non-investment activities, such as purchasing goods or services, may require Value Added Tax (VAT) to be paid based on the transaction value.

Additionally, profits from mining activities, if considered as business or trade activities, are subject to income tax. Due to the complexity of cryptocurrency taxation and its dependence on individual circumstances, it is strongly recommended to seek advice from tax experts or contact Her Majesty's Revenue and Customs (HMRC) for personalized guidance.

7. Summary

The UK, located on the British Isles off the northwest coast of the European mainland, is the sixth-largest global economy and the second-largest economy in Europe, primarily driven by the service industry, with London being an outstanding global financial center. In recent years, Brexit has had an impact on the economy, leading to some economic challenges, prompting the Bank of England to raise interest rates, which has had a negative impact on economic growth. The economic outlook for the UK in 2024 may face a slight risk of recession.

The cryptocurrency market in the UK is on the rise and has attracted a large number of young, highly educated, and above-average income individuals, especially those interested in innovative technologies such as blockchain. The regulatory environment in the UK is generally favorable to cryptocurrencies, allowing citizens to buy and sell crypto assets, albeit subject to a relatively high 20% capital gains tax. Cryptocurrency businesses must comply with regulations from the Financial Conduct Authority (FCA) in the UK, implementing robust anti-money laundering and counter-terrorism financing policies and procedures. Compliant centralized exchanges, such as eToro and Uphold, operate in the UK, while non-compliant platforms, such as Binance, have been forced to cease operations. As a financial center, London takes a positive stance towards blockchain technology, and local venture capitalists support numerous Web3 projects in various domains.

With further improvements in government regulations and the rapid growth of the financial services industry, the UK region dedicated to legal and compliant cryptocurrencies has been at the forefront of many cryptocurrency markets. As an integral part of the global economy, the UK is bound to have a profound impact on the global cryptocurrency market.

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