How to Buy Bitcoin and Ether in the U.K.

Legal Considerations

Buying Bitcoin (BTC) and Ether (ETH) is entirely legal in the U.K., with a well-defined regulatory framework in place. Cryptocurrencies are categorized as taxable assets by HMRC, and they are subject to taxation. Acquiring Bitcoin and Ether in the U.K. triggers the tax reporting and payment obligations associated with cryptocurrency transactions.

Cryptocurrencies are not recognized as legal tender in the U.K. This regulatory approach helps to foster innovation and promote awareness of associated risks, creating a transparent, legal environment for buying, selling, and holding Bitcoin and Ether.

The Financial Conduct Authority (FCA) expanded its regulatory oversight to include crypto asset promotions in the U.K. and implemented the Travel Rule, which requires U.K.-based crypto asset businesses to collect and share information on transfers.

Secure Storage Options

Prior to investing in Bitcoin and Ether, it’s essential to have a secure crypto wallet. Leaving holdings on an exchange account is convenient for small quantities, but for larger amounts, transitioning to a more secure storage solution is recommended.

Bitcoin wallets, including hardware, software, and paper options, are used to securely manage and store Bitcoin holdings. Ethereum wallets act as secure repositories for ETH, providing control over assets and facilitating transactions.

To reduce risk, investors can enhance security by transferring their cryptocurrency from an exchange’s default wallet to their own cold wallet, which is not online and thus less susceptible to hacking.

Cryptocurrency Exchanges and Brokers

Investors need to choose a crypto exchange or broker before purchasing cryptocurrencies. Crypto exchanges operate without formal regulation in the U.K., but registration with the FCA is mandatory. Some well-known crypto exchanges in the U.K. include Gemini, Bitpanda, Kraken, and Crypto.com.

Cryptocurrency brokers simplify the buying process with user-friendly interfaces that interact with exchanges. Some brokers charge higher fees, while others offer their services for free but profit by selling traders’ data or executing user trades at suboptimal market prices.

Purchasing Process

After selecting a crypto exchange or broker, investors can sign up to open an account and fund it through options like linking a bank account or using debit or credit cards. Identity verification is mandatory, and investors may need to complete a crypto risk awareness quiz.

Once the account is funded, investors can proceed to place their order for purchasing Bitcoin or Ether by entering the desired amount in pounds. The process varies by exchange, but most have a straightforward “Buy” button for BTC and ETH.

Securely Storing Bitcoin and Ether

Cryptocurrency exchanges run the risk of theft or hacking and are not protected by the Financial Services Compensation Scheme. Investors can store or withdraw Bitcoin and Ether to a chosen external wallet for added security. However, investors purchasing through a broker may have limited control over where their cryptocurrency is kept.

Cryptocurrency ATMs

Crypto ATMs were banned in the U.K. by the FCA in February 2023 due to the risks associated with their use.