Buying Bitcoin (BTC) and Ether (ETH) in the U.K. is legal, yet it can pose challenges due to the government’s need to comprehend the associated risks. To navigate this process effectively, investors should choose the right crypto exchange or broker, set up a secure wallet and make informed decisions.
Is it Legal to Buy Bitcoin and Ether in the U.K.?
In the United Kingdom, cryptocurrencies are categorized as taxable assets by His Majesty’s Revenue and Customs (HMRC), and they are subject to taxation. Additionally, the Financial Conduct Authority (FCA) expanded its regulatory oversight to include crypto asset promotions in the U.K. in October 2023, emphasizing compliance with accurate information and risk warnings.
Secure Wallet Practices to Safeguard Bitcoin and Ether Holdings
Prior to investing in Bitcoin and Ether, it is essential to have a secure crypto wallet. Leaving holdings on an exchange account is convenient for small quantities, yet transitioning to a more secure storage solution can be an option for those investors who want to store larger amounts of tokens. It is crucial to remember that retaining funds on an exchange means lacking control over the keys and, consequently, forfeiting control over the coins.
Bitcoin wallets, including hardware, software and paper options, are used to securely manage and store Bitcoin holdings, while Ethereum wallets act as secure repositories for ETH, providing control over assets and facilitating transactions. Cryptocurrency users rely on Bitcoin and Ether wallets to safeguard and control their digital assets, ensuring the secure management of private keys essential for accessing and managing their holdings. To reduce risk, an investor can enhance security by transferring their cryptocurrency from an exchange’s default wallet to their own cold wallet, which is not online and thus less susceptible to hacking.
Buying Bitcoin and Ether in the U.K. Through Crypto Exchanges
When selecting a crypto exchange or broker, investors need to consider BTC and ETH availability, daily trading volume to guarantee adequate liquidity for smooth transactions, fees that can affect returns, and desired trading types such as limit orders and margins. Additionally, verifying an exchange’s availability in the U.K. and compliance with regulatory changes is essential for informed decision-making.
Cryptocurrency brokers such as interactive brokers and eToro simplify the crypto buying process with user-friendly interfaces that interact with exchanges for investors. However, brokers can restrict investors from moving their crypto holdings to external wallets.
Once an investor has signed up to open an account and funded it through options like linking a bank account or using debit or credit cards, identity verification is mandatory. Upon creating an account and selecting a payment method, investors can place their order for purchasing Bitcoin or Ether by entering the desired amount in pounds.
In February 2023, the FCA imposed a ban on cryptocurrency ATMs and urged operators to shut down their machines or face enforcement actions. The FCA warns that using these machines is risky, as they operate unlawfully and provide no protection in case of issues.
Crypto Exchange-Traded Funds (ETFs): An Alternative to Directly Holding Bitcoin and Ether
Exchange-traded funds (ETFs) provide diversified exposure to multiple holdings within a single investment, including cryptocurrencies like Bitcoin and Ether. Investment trusts pool investors’ funds through the sale of a set number of shares, providing instant diversification and reducing risk compared to picking individual investments.
Other Methods to Buy Bitcoin and Ether in the U.K.
Several U.K. banking and financial apps, such as PayPal, Revolut, Skrill and MoonPay, have introduced the ability for customers to purchase Bitcoin and Ether directly on their platforms. Payment processors, such as BitPay, can be used to buy BTC and ETH, and traders can utilize peer-to-peer (P2P) crypto platforms, such as Cash App and Paxful, to trade digital assets.
In conclusion, navigating the process of buying Bitcoin and Ether in the U.K. requires understanding the legal considerations, secure storage options and cryptocurrency exchanges and brokers. To ensure a secure and successful experience, investors should research the available options and make informed decisions regarding payments and orders.