In order to effectively navigate the process of purchasing Bitcoin, it is important to consider secure options. While acquiring cryptocurrencies is legal in the United Kingdom, there are challenges that need to be understood due to the government’s emphasis on comprehending the associated risks.
To successfully navigate the crypto landscape, investors should follow certain steps, including selecting the right crypto exchange or broker, setting up a secure wallet, and making informed decisions regarding payments and orders.
This article provides information on purchasing Bitcoin (BTC) and Ether (ETH) in the U.K., while also discussing legal considerations, secure storage options, and recommended cryptocurrency exchanges and brokers for a seamless market experience.
Is it legal to buy Bitcoin and Ether in the U.K.?
The purchase of Bitcoin (BTC) and Ether (ETH) is entirely legal in the U.K., with a well-defined regulatory framework in place. These cryptocurrencies are considered taxable assets by the HMRC, and individuals are required to report and pay taxes on their crypto transactions. Keeping accurate records is crucial to ensure compliance with tax regulations for both gains and losses.
It is important to note that cryptocurrencies are not recognized as legal tender like the British pound. This regulatory approach fosters innovation and promotes awareness of the associated risks, creating a transparent and legal environment for buying, selling, and holding Bitcoin and Ether.
The Financial Conduct Authority (FCA) has expanded its regulatory oversight to include crypto asset promotions in the U.K., emphasizing compliance with accurate information and risk warnings. Additionally, the Travel Rule mandates that U.K.-based crypto asset businesses collect, verify, and share information on transfers, impacting the pseudonymous nature of cryptocurrencies.
Secure wallet practices to safeguard Bitcoin and Ether holdings
Before investing in Bitcoin and Ether, it is essential to have a secure crypto wallet. While leaving holdings on an exchange account is convenient for small amounts, transitioning to a more secure storage solution is recommended for larger investments.
It is crucial to understand that wallets do not store cryptocurrencies directly; instead, they secure the private keys necessary for accessing and managing the assets. Losing these keys means losing access to the holdings.
There are various types of wallets available, including hardware, software, and paper options, for securely managing and storing Bitcoin and Ether.
Buying Bitcoin and Ether in the U.K. through crypto exchanges
To purchase cryptocurrencies, investors need to choose a crypto exchange or broker. While both options enable crypto purchases in the U.K., there are significant distinctions between them. Security should be the primary consideration when selecting a crypto exchange or broker, as the possibility of hacks in the crypto space is a growing concern.
Crypto exchanges in the U.K. operate without formal regulation, but registration with the FCA is mandated. Some exchanges, such as Gemini, Bitpanda, Kraken, and Crypto.com, have successfully registered with the FCA.
When choosing a crypto exchange, it is important to check for the availability of BTC and ETH, as well as substantial daily trading volume for liquidity. Fees should also be considered, especially for high-frequency traders, and desired trading types, such as limit orders and margins, should be offered.
It is crucial to verify an exchange’s availability in the U.K. and compliance with regulatory changes to make informed decisions.
Cryptocurrency brokers simplify the buying process with user-friendly interfaces that interact with exchanges. While some brokers charge higher fees, others offer free services but profit by selling traders’ data or executing trades at suboptimal market prices.
Payment options, such as linking a bank account or using debit or credit cards, can be used to fund crypto exchange or broker accounts. Identity verification is mandatory, and there may be a waiting period before funds can be used to buy cryptocurrency.
Once the account is funded, investors can place an order to purchase Bitcoin or Ether by entering the desired amount in pounds. Fractional shares of cryptocurrencies can also be purchased on most exchanges, allowing ownership of smaller portions of higher-priced tokens.
It is possible to store or withdraw Bitcoin and Ether to an external wallet for added security. However, investors purchasing through a broker may have limited control over where their cryptocurrencies are stored.
Cryptocurrency ATMs are banned in the U.K. due to their unlawful operation and lack of protection for users. The FCA warns against using these machines and plans to take enforcement actions against unregistered operators.
Crypto exchange-traded funds (ETFs) provide diversified exposure to multiple holdings, including Bitcoin and Ether, within a single investment. They offer instant diversification and reduce risk compared to individual investments.
Other methods to buy Bitcoin and Ether in the U.K. include using banking and financial apps like PayPal, Revolut, Skrill, and MoonPay. JPMorgan’s U.K. bank, Chase, prohibits cryptocurrency transactions for its British customers due to an increase in fraud and scams.
Payment processors like BitPay can be used to buy BTC and ETH, converting fiat currency into cryptocurrencies.
Peer-to-peer (P2P) crypto platforms like Cash App and Paxful allow direct cryptocurrency transactions between individuals. However, U.K. investors have limited legal protections in the event of platform insolvency.