For the first time, taxpayers in the UK will be paying taxes on crypto assets. The Government wants its piece of the action. But at the same time, and confusingly, a number of major banks are looking askance on crypto trading—going so far as to freeze the accounts of people who are suspected of, or admit to, trading.
Scott Snaith, who runs an electric bike business in Loughborough, and has plans to diversify into the crypto realm, has been frozen out of his personal bank account for six months. Why? Because he admitted to doing some “experiments” in buying and selling crypto over a weekend last August. The following Monday, he came into work to find that both the personal account he had used for his experiments and his business account had been frozen by his bank, Barclays, leaving him unable to run his business.
At first, Snaith had no idea why the accounts had been frozen:
“They called me on Monday morning and asked ‘What are these transactions?’ I was totally open and honest, but as soon as I mentioned the word ‘bitcoin,’ their attitude changed and I never had my account reopened after that, he says. “I was a long-standing customer, I had a good relationship with my bank manager.”
Snaith didn’t regain access to his business account for two weeks, so was forced to open a new one. His personal account remains frozen, with a few hundred pounds still inside. It didn’t help that he provided the bank’s fraud office with all the names, addresses, and IDs of the people he’d transacted with on the popular trading site localbitcoins.com. Snaith’s case is still being reviewed by the banking ombudsman.
“At present UK customers can use both their Barclays debit card and Barclaycard credit card to purchase cryptocurrency legitimately,” a Barclay’s spokeswoman confirmed to us. “I don’t want to comment on that customer and I’m not aware of their individual circumstances, but we’ve got a risk-review system that applies to transactions that are different or something that is out of the ordinary.”
It's unclear how many others are in the same boat with Staith. But banks taking unilateral action against crypto business owners and traders by freezing their accounts is an even bigger problem in the US. Earlier this month Morgan Creek founder, Anthony Pompliano tweeted asking people for their worst banking experiences. MyCrypto Wallet founder, Taylor Monahan was among those who replied. She told how her bank had decided to close down her accounts, just before Christmas.
It all feels desperately unfair to Snaith: “The banks have, on one hand, been told by the government to clamp down on crypto trading, but the government is now saying that you should be taxed on every transaction,” he complains.
It is a confusing state of affairs. Last year Barclays reportedly granted an account to crypto exchange, Coinbase—the first agreement reached between a leading UK bank and a cryptocurrency exchange.
Meanwhile, in December, Her Majesty's Revenue and Customs (HMRC) published new policy making crypto a taxable asset class—it’s virtually the only European nation to impose a levy on gains made from crypto trading.
This simply salts Staith’s wounds. His new venture involves an electric bike that generates cryptocurrency as you ride it. He says that, as it stands, the UK’s newly minted crypto legislation would mean that—theoretically— every turn of the pedal would be a taxable transaction. "It’s just stupid, blind and ignorant to what the actual usage is. You wouldn’t mind if they made it a better market and put in regulations.”
So Staith got in touch with his local member of parliament, Nicky Morgan. Morgan also happens to be Chair of HMRC's Treasury Committee and is responsible for UK cryptocurrency regulations. But, according to Snaith, she had little consolation to offer on the way crypto is taxed or his banking issue.
IMAGE: Scott Snaith
In an interview, a spokesperson said that the Committee’s report on crypto assets “didn’t explicitly examine the issue you raised and didn’t take any evidence on it, so I don’t think Nicky is going to comment on this at the moment.”
As regards current tax policy, the attached document was a little baffling, even to those who eat whitepapers for breakfast.
Individuals, says the guidance, will be liable to pay income tax on cryptoassets from mining, transaction confirmation or airdrops. Activity amounting to a financial trade in itself, however, is only likely to happen “in exceptional circumstances” and “whether an individual is engaged in a financial trade through the activity of buying and selling cryptoassets will ultimately be a question of fact.” Hmmm.
But the long-suffering Brits aren’t exactly clamoring for elucidation. Perhaps Brexit is too much of a distraction.