What are Cryptoassets?
HMRC defines cryptoassets as “cryptographically secured digital representations of value or contractual rights” that have the potential to be transferred, stored and traded electronically.
HMRC do not consider cryptoassets such as Bitcoin and Ethereum to be currency or money. The government’s Cryptoasset Taskforce (CATF) identifies three types of cryptoassets: exchange tokens, utility tokens and security tokens.
- Exchange tokens – these are intended to be used as a method of payment and include cryptocurrencies like Bitcoin and Litecoin. They do not provide any rights or access to goods or services.
- Utility tokens - these provide the holder with access to particular goods or services on a platform usually using Distributed Ledger Technology (DLT).
- Security tokens - these may provide the holder with particular interests in a business, including debt due by the business or a share of profits in the business.
We will not go into more detail about the different types of cryptoassets, as their treatment for taxation purposes is based on the “nature and use of the token and not the definition of the token”.