Best Bitcoin Exchange for the United Kingdom
Great Britain is home to an enthusiastic Bitcoin scene, but is extremely ambivalent about the crypto currency as a whole. While many individuals recognise the potential of the Bitcoin and set about exploring its possibilities, the establishment remains rather reserved. This conflict is likely to hamper Bitcoin’s acceptance in Britain and, paradoxically, promote its rise as an unofficial currency.
In January of this year, London experienced its Satoshi Square. It was an informal meeting on the outskirts of the City of London – the rich financial district of the city that is the capital of global financial flows. Organized by Tom Robinson of Elliptic, a London start-up that stores and insures Bitcoins “cold”, Satoshi Square attracted about 100 people. Bitcoin enthusiasts met to get to know each other, to exchange the latest news and to trade in real time. It was like in 80’s movies about Wall Street: everyone roared and waved their hands to bid for coins. These, however, were then exchanged using smartphone apps.
Satoshi Square is a good picture to describe the ambivalence that makes Britain’s access to the world’s most popular crypto currency. On the one hand, it shows the vibrant culture that is quickly building up around the Bitcoin – not only in London, but also in cities across the country. On the other hand, it speaks volumes that supporters of Bitcoin are public but outside the establishment. Of course, Satoshi Square sprays energy and offers an opportunity to meet like-minded people – but why bother to exchange cash for Bitcoins when there are much easier ways?
Buying Bitcoin in the UK
It is not difficult to buy Bitcoins in Great Britain. All you need is a bank account and an Internet connection. However, unless you are in Satoshi Square, it is almost impossible to buy Bitcoins at fair prices.
The leading sites all work in the same way. After the buyer has agreed to buy Bitcoins and given a Bitcoin address, he receives an order code, the purchase amount in sterling and the seller’s bank details. The buyer must then transfer the amount via online banking and enter the order code as a reference. When the seller registers the receipt of the money, he releases the Bitcoin.
There is currently only one functioning Bitcoin exchange in the UK. Others have existed once, in this or that form, but all have had problems when the bank refused to process transfers. The managing director of the only really usable exchange recently wrote to all users: “We have been operating for 2 months now. We have nearly 1,000 registered customers and are a stock exchange that is obviously running flawlessly. We’ve had some software glitches, but most of the time we’ve been able to fix them within minutes, and we’ve always followed the rules. So far, so good. While we have a large amount of your money in the account and a large number of Bitcoins in the cold wallet, you seem to loathe trading in large quantities. It looks like we’ve become a bank instead of a stock exchange.”
The main problem is probably the cost. It’s expensive to put Fiat money on exchanges and debit it: 10 pounds per transfer (12 euros) is not uncommon. To acquire small Bitcoin amounts becomes thereby unaffordably expensive. It is cheaper to buy them on one of the marketplaces mentioned above and then transfer them to the stock exchange. But you can’t do much with them once they’re there. Because the trading volume is small, the spread between bid and ask is unrealistically high and worthwhile trades are rare. A dilemma.
Finally, there is an alternative for Brits to buy Bitcoins: The European stock exchanges. As members of the SEPA region, Britons are not deterred from sending money to these exchanges and buying Bitcoins at the prices there. The problem is, once again, the banks: they usually charge a fee of at least £10 to make a transfer to the continent and also switch to immoral rates. The result is, again, costs of 5 to 10 percent above the market price to buy a single Bitcoin. Ironically, with these hefty charges, banks are pointing out the problem that the Bitcoin is supposed to fix.
Obviously UK banks do not want their customers to use their service to buy Bitcoins. Somehow understandable, too. But the British are an entrepreneurial bunch, and even in London – especially in London, the heart of the financial system – they have found ways to buy, sell and trade Bitcoin. Bitcoin ATMs landed in London long before they showed up in other major cities. In an ocean of press reports about new ATMs floating all over the world, a BBC news story stands out: “On the 39th floor above Canary Wharf, overlooking London’s financial centre, I discovered a slightly different ATM. This ATM eats your 10 pound bill, enough to spit it out, and gives you a computer code for it. This is the world’s first Bitcoin cash machine, and if you believe the people who showed it to me, it shows us the future of money.” This story is from July 2, 2013.
Beer for Bitcoins
A short train ride from London is the historic university town of Cambridge. Here you can see gothic churches that are more than 1000 years old, red brick houses, soot-blackened, sandstone polished by the centuries – and of course the university, with small tea shops, shops and student pubs between its pompous buildings that are up to eight centuries old. In summer the Cam is full of boats sailing leisurely up and down the river, while students celebrate the end of another busy year of lectures and exams, preparing to join the elite of politics, science, business and media that traditionally dominate Cambridge graduates.
Cambridge was home to Alan Turing, the computer scientist and KingsCollegeChapelWest cryptanalyst who was instrumental in cracking the Nazi Enigma encryption in World War II. If a city in Britain is to be expected to be enthusiastic about the Bitcoin, it is Cambridge. And so it is: Strolling through Cambridge, you will meet many Bitcoin fans and shops who have dared to take the step of accepting the Bitcoin for their goods. At least two pubs in the city are taking Bitcoins for beer, and have been doing so since June 2013 – several months before the crypto currency reaches its all-time high and sparks massive press interest.
(No) taxes on Bitcoins
Okay. Okay. British banks don’t like the Bitcoin, but entrepreneurs have recognised its merits and are trying to turn both its advantages over Fiat money and media interest into cash. What about the government?
The UK tax administration seems confused rather than hostile. Already in June 2011 an article about the Bitcoin appeared in the popular Manazin “New Scientist”. The article, broadly positive, quoted the official tax position of the time: “HMRC, the UK tax authority, says people don’t incur tax liabilities when trading Bitcoins unless they turn their profits into real money. But once ordinary money is involved, the revenue could become taxable.” Respect for commenting at all – but “could become taxable” is not exactly the clarity an accountant wants to work with.
A year later, the HMRC realised that conventional money was involved in Bitcoin trading, and not in small amounts. In November 2013, the HMRC apparently classified Bitcoins as vouchers. Coindesk quoted Tom Robinson, Managing Director of BitPrice (which later became Elliptic, a company that stores and insures Bitcoins), who provided the following information from HMRC: “The view of our team is that it is not a currency. It is our view that the provision of Bitcoins is equivalent to the sale of vouchers”. Robinson commented: “This is obviously a totally inadequate classification of the Bitcoin: they are not issued by anyone, they have no nominal value and they can be exchanged for a huge range of goods and services”. Even HMRC itself seems confused about whether or not to levy VAT on Bitcoin sales. Two months later, after Robinson had spoken to the tax authorities and explained the nature of Bitcoin to them, HMRC was on the verge of classifying Bitcoin as private money like Germany.
Now the authority has confirmed that it does not want to levy VAT on Bitcoins. Bitcoin companies from around the world have enthusiastically received this news and believe that London could become the Bitcoin capital of the world. The Bitcoin Foundation is even planning to move to London in the coming months, underlining Britain’s position as a Bitcoin-friendly country – despite the obstacles the banks are putting in the way of Bitcoin.
A glance at coinmap.org shows that Great Britain is already a pioneer: more than 170 Bitcoin companies can be found. There are 60 of them in London alone, which means that the city shares its status as the Bitcoin capital of Europe with Berlin.
The Bitcoin has many fans in Great Britain. The country keeps up with the USA, Nordic and other leading countries in terms of client downloads, there is a thriving meet-up scene and a burgeoning corporate culture.
At the same time it’s clear that the British banks don’t want to hear about Bitcoin and have done what they can to get the “problem” out of their minds that they see Bitcoin as. Instead of promoting it – or at least making it possible, as the European banks seem to do – they wall it up and step backwards, making it harder than necessary for people to buy Bitcoins. Meanwhile, the tax administration, like many other authorities in the world, is making a rush policy.
Some of this is merely due to Bitcoin’s status as a new and disruptive technology and will be ironed out in due course. But London is the capital of global capital, and the banks that have turned it into the powerhouse of capitalism are throwing sand in the works.
Regulation may be atrocious for Bitcoin purists who see the crypto currency as a solution to the problem of state intervention in the financial system. In Britain, however, a little clarification would make things easier for everyone.