According to a Telegraph report, crypto exchanges in Britain will now have to pay a 2% digital services tax. The UK tax authorities, HMRC, do not recognize digital assets as financial instruments and therefore exchanges do not qualify for financial exemptions.

On November 28, the authority included cryptocurrency exchanges under the Finance Ministry's technology tax. The digital services tax on income was introduced in April 2020 and targeted social media and search giants such as Facebook and Google.

The latest blow to crypto exchanges comes as a result of HMRC's classification of crypto assets, as the regulator explained:

“There are a wide variety of crypto assets, each with different characteristics. It said that because cryptocurrencies do not represent commodities, financial contracts or money, it is unlikely that crypto asset exchanges will be able to benefit from the exemption for online financial marketplaces.
According to CryptoUK, the trade body representing Britain's digital asset sector, the tax is unfair and will likely be passed on to investors and traders.

Executive Director Ian Taylor stated that treating cryptocurrencies differently than other financial instruments such as stocks or commodities is detrimental to the crypto sector.

He added that it is another major blow to the sector following the burdensome licensing system introduced by the Financial Conduct Authority (FCA) for exchanges. Since January, all UK crypto asset companies have been required to comply with AML (anti-money laundering) regulations and register with the FCA.

The regulator imposed a ban on crypto derivatives in January, and in June the FCA warned consumers about 111 crypto companies that had yet to register with it.

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