How to Buy Crypto in the UK

Today, interest in crypto is growing worldwide, and the United Kingdom is no exception. In this article, we will answer the main questions: how to buy crypto, what are the options, and how does the tax service view it.

Is It Legal to Buy Cryptocurrencies in the UK?

Yes, it is legal to buy, sell, or transfer crypto in the United Kingdom. But cryptocurrency is not recognized as legal tender, because cryptocurrency as a means of payment is not fully regulated, and both merchants and buyers may be at risk.

The British government aims to oversee the cryptocurrency industry; therefore, the Financial Conduct Authority (FCA) handles the regulation. The main requirement is for all crypto exchanges and wallet providers to register with the FCA and follow AML (Anti-Money Laundering) policy and KYC (Know Your Customer)) rules.

Additionally, in 2023, the FCA introduced new regulations requiring cryptocurrency exchanges to obtain a license or approval to legally promote their services. Following this innovation, some platforms (like Binance and CEX.io) temporarily left the country.

Ways to Buy Crypto in the UK

Once you are familiar with all the legislation nuances, you can choose the right option for purchasing crypto assets. There are many convenient ways in the country, so let's take a closer look at each option from different angles.

Crypto Exchanges (CEXs)

A crypto exchange is a platform where users can purchase, sell, and exchange cryptocurrency for other digital assets or fiat (like pounds). However, if you are unfamiliar with the crypto industry, you may face challenges because of the numerous features and intricate interface.

Take your time to find a platform that is appropriate and convenient for you. For example, the Cryptomus exchange is an excellent option, offering a user-friendly interface and an educational blog for beginners, with valuable advice for experts on developing strategies.

• Pros: wide selection of coins, strong security measures.

• Cons: platform control, KYC required.

Crypto Brokers

A crypto broker is an intermediary that simplifies the process of trading digital assets for users. Crypto brokers offer intuitive interfaces that interact with the exchange on your behalf.

A broker is a popular alternative to crypto exchanges in the country, because brokers provide professional assistance. However, the big downside is that some brokers charge higher fees (1% or more of the transaction amount) than exchanges.

• Pros: intuitive interface, minimum entry threshold.

• Cons: higher commissions, often storing crypto only within the service.

P2P platforms

P2P (peer-to-peer) is a way to buy cryptocurrency directly from another user. The transaction takes place through specialized platforms that act as a guarantor: the crypto is blocked in escrow and transferred to the buyer only after payment is confirmed. Users choose this method for favorable rates and the ability to negotiate directly with the seller. Most often, transactions are made through bank transfers, PayPal, or Revolut transfers.

However, you need to be careful: when using unverified sites, there is a fraud risk, and some banks may suspect P2P transactions and temporarily restrict access to the account.

• Pros: better rates compared to exchanges, payment method flexibility, and more privacy.

• Cons: risk of fraud, longer purchase process.

Digital Banks

Digital banks are modern fintech apps that operate entirely online without traditional branches. Revolut, Monzo, and Starling allow users to store, transfer, and buy cryptocurrency directly from the app.

For some Brits, this option is the necessary step into crypto investing due to buying through a familiar mobile banking interface. For example, Revolut supports dozens of cryptos and even allows you to place automated orders. But, it is worth considering that crypto in digital banks is often stored in a "virtual balance" inside the app, and users can’t withdraw assets to an external wallet.

• Pros: intuitive interface, instant transactions in GBP, easy integration with bank cards.

• Cons: higher commissions compared to exchanges, restrictions (like Revolut) on withdrawal.

Step-By-Step Guide: How to Buy Crypto in the UK

To make buying cryptocurrency in the UK hassle-free, we have prepared a general and detailed guide to buying cryptocurrencies for you. Follow each step to reach your goal:

• Step 1: Choose the platform and create an account.

• Step 2: Complete KYC verification.

• Step 3: Make a purchase. Here we will describe in more detail the purchasing process on each platform, and you will select the most comfortable method to buy cryptocurrency.

Step 1: Register on the Platform

Select the crypto platform that suits you best and sign up. The process usually requires entering your name and a phone number or email and will only take a few minutes.

Be mindful of legal obligations: as previously stated, for legal trading, the exchange must adhere to AML regulations and facilitate the KYC process. At this point, create a robust password and activate two-factor authentication (2FA) to safeguard your data and funds from scammers.

Step 2: Complete KYC Procedure

Following registration, it's necessary to finish KYC verification. This will allow you to access monetary transactions on the platform. Usually, the “KYC Verification” item is located in the platform’s settings. To verify your identity, you must first capture a selfie and then take a picture of your identification document. Then, submit both files to the platform. Await procedure confirmation from the moderator.

Step 3: Choose the Most Convenient Way to Buy Cryptocurrency

CEX

After registering and passing KYC verification, you need to fund your account. You can accomplish this through a bank transfer. Then, once the money is in your account, purchase the cryptocurrency. The process is simple: select the desired crypto coin and specify the amount you want to purchase. Next, input your card information and verify the transaction with the 2FA code.

P2P platform

To complete a transaction this way, begin by adjusting the required filters: the quantity of cryptocurrency desired, the fiat (e.g., GBP) you intend to use for the acquisition, and the most suitable payment option.

For instance, the Cryptomus P2P exchange may serve as a great alternative. The platform accommodates over 120 cryptocurrencies, 40 fiat currencies, and more than 560 payment options. And these figures are increasing! A nice piece of news is a commission rate of merely 0.1%.

After setting up the filters, you will see a list of offers from sellers. Choose the most suitable one and contact the potential trading partner to discuss the details. We recommend that you only trade with verified sellers to minimize the fraud risk. If you don't find a suitable offer in the list, create your own advertisement and wait for a response.

Digital Banks

The purchase process takes place right within the banking app (like Revolut or Monzo), which many Brits already use on a daily basis. After logging into the application, go to the "Cryptocurrency" section (in Revolut, it's available under the "Invest" tab). Then, select the cryptocurrency you want to purchase and enter the amount in pounds you want to spend. Next, confirm the transaction.

The money will be deducted directly from your pound balance or linked debit card, and your cryptocurrency balance will instantly appear in the app. Please note that in most cases you cannot withdraw cryptocurrency to an external wallet, and you can only manage it within the app.

Crypto Brokers

To get started, sign up with a trusted broker in the UK. Popular options include platforms that support payment in pounds sterling via bank cards or fast payment systems. Once you complete the KYC procedure, you can deposit pounds into your account.

Next, select the cryptocurrency you wish to purchase, indicate the amount in pounds, and confirm the buying. The broker will process the transaction at the market rate with a service fee, which is usually higher than the exchange.

The purchased cryptocurrency will appear in your account immediately. Keep in mind, however, that many brokers do not allow withdrawals to external wallets, which means you are storing assets on their platform.

Simple Way to Buy Crypto with Your Bank Card

If you are looking for the easiest way to purchase cryptocurrencies, use your bank card . The process looks like this (with Cryptomus as an example):

Step 1: Register on Cryptomus

The process will take you just a few minutes, as you can log in using the most convenient method, including Telegram, Facebook, or Google. At this stage, enable 2FA to protect your data and money from potential hacking attacks.

Step 2: Complete the KYC Verification

The Cryptomus platform follows AML policy and adheres to high security measures, so KYC verification is a necessary part of the registration process. This stage will allow you to access financial transactions within the exchange.

To complete verification, go to the “Settings” section. Next, click on the KYC verification button, which is the third item in the list. Take a photo of your ID and a selfie, then upload these files to the platform. This procedure allows the platform to verify that you are a real person and confirm your verification.

Step 3: Return to the Dashboard and Click “Receive”

Fill in key criteria: select the desired cryptocurrency to buy and an available network. Then choose “Fiat” as a type of receive option when you’re buying any crypto with a debit or credit card.

Step 4: Fill in the Details

Click on “Receive via Mercuryo” and fill in the gap with the amount you’re going to pay in the preferred currency. The receiving amount of cryptocurrency will be automatically calculated in the payment form.

Step 5: Confirm Your Purchase

So, fill in your email address for getting a verification code, and enter your debit or credit card details to make a purchase.

Great job! You’ve simply purchased cryptocurrency using a card without any issues. The money will be added to your personal wallet shortly!

Do You Have to Pay Taxes on Cryptocurrency Investments?

Indeed, cryptocurrency is liable for capital gains tax (CGT) in the UK. FCA requires individuals to keep detailed records and report profits in their annual tax returns. Find out if you need to pay capital gains tax on profits earned from the sale, exchange, or distribution of crypto asset tokens. For each pool of tokens, you must keep separate records for each transaction, including the:

• type of tokens
• date you disposed of them
• number of tokens you’ve disposed of
• number of tokens you have left
• value of the tokens in pound sterling
• bank statements
• pooled costs before and after you disposed of them

The tax rate you pay depends on your total income for the tax year. At the time of writing, if your income is up to £12,000, you pay 0%, if it is between £12,000 and £50,000, you pay 20% income tax. Read the instructions to understand whether you need to pay taxes, how, and how much.

So, buying cryptocurrency in the UK is an affordable process if you understand the basic rules. Crypto regulation is evolving and boosting trust in the cryptocurrency sector, potentially signaling a positive outlook for long-term investments. The essential approach is to invest prudently, spread your risks, and include cryptocurrency in a wider financial plan.

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