Mini-Budget 2022 and its impact on cryptocurrencies

New chancellor Kwasi Kwarteng has remained tight lipped on his plans for digital assets in the UK, with no new measures announced in the fiscal update on Friday 23 September.

Both the new Prime Minister Liz Truss and Chancellor Kwasi Kwarteng have had very limited public views on cryptocurrency and digital assets as a whole. Truss’ only public statement on the matter was made back in in 2018, when she tweeted ‘’We should welcome cryptocurrencies in a way that doesn’t constrain their potential.” Kwarteng meanwhile has made more of a statement with his actions, as his previous department identified blockchain systems as one of the “seven technology families that will transform our economy in the future.” In July, his Business, Energy and Industrial Strategy department announced a £53 million fund for supporting technological innovation, including the use of blockchain in supply chains.

Former Chancellor and prime ministerial candidate Rishi Sunak, had planned to turn the country into a crypto hub if he took over leadership of the country. It remains to be seen to what extent Truss and Kwarteng share Sunak’s vision on digital assets.

Despite the well documented crash of the value of the pound following the fiscal event announcements by the Chancellor, crypto markets have remained relatively stable. The price of both Bitcoin and Ethereum has actually increased since the Chancellor’s announcement, though the prices are still significantly below the pre-crypto price crash.

The current tax rules with regards to cryptocurrency and digital assets remain unchanged, with HMRC deeming the digital assets very similar to shares. As a result, any disposals of Cryptoassets result in a capital gain, which are chargeable to capital gains tax should the gain exceed an individual's annual exemption for the year of £12,300. A disposal of one Cryptoassets for another is also deemed to be a disposal, for which the proceeds are deemed to be the market value of the crypto purchased at the date of the disposal.

The future of digital assets in the UK remains a question on many lips, with uncertainty over whether the government will make any announcements regarding digital assets in the further fiscal update expected in November.

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