150 years ago the main export goods of Great Britain were cars and mechanisms. Today, the United Kingdom actively sells jurisdiction. And the buyers exist, because in the world there is an opinion that the legal system of this country suits good for doing business, and the High Court of London is the most independent and fair. Is it really so? And how much is the British legal system convenient for the digital economy?
Indeed, tens of thousands of companies from the real sector of the economy are registered on the British Isles. They also prefer the English court to resolve disputes and disagreements. Such an enthusiastic attitude to this jurisdiction is simply explained. "In Britain, there is always something that the parties have agreed upon," says Yevgeny Zhilin, director of the Russian law firm YUST. "If you do not fulfill the agreement, they will force you." Moreover, experts believe that English law does not establish unreasonable prohibitions and has predictable law enforcement practice. However, that works well in the real sector of the economy can cause digital failure.
At the initial stage of the development of the crypto industry and blockchain projects, many startups preferred to be registered in the UK. It was the strength of tradition, the reputation of the legal system and the developed financial and legal infrastructure. But as soon as it came to the real practice of applying the current regulation, many people were facing the disappointment.
Royal official instances could not give a clear definition of what the cryptocurrency is. The Office for Financial Regulation and Supervision of the UK made several statements, each of them states that digital tokens cannot be considered as money, and transactions with them are not related to the financial regulation.
Moreover, the Law on Digital Money states that the cryptocurrency cannot be considered as a payment since it lacks a single emission center. According to another normative act, the Law on Payment Services, digital assets are also "not a value" and can not be "banknote, coin, electronic money or other monetary units". Ultimately, the British judicial system defined the cryptocurrency as "a unique combination of numbers derived from the complex of mathematical calculations." And nothing more.
Such a vague definition has generated a lot of procedural problems in determining the value of assets, their ownership, and taxation.
Finally, it is necessary to stop. The UK's Internal Revenue Service recognized digital currencies as an asset with value. Therefore, people and companies that receive profits from them must pay corporate income tax, and transactions with them must be taxed on capital gains with a base rate of 18%. Many people use blurry formulations for mercenary purposes. For example, many crypto businessmen decided to present the income received from transactions with virtual assets as winnings in casinos or on cards. And, surprisingly, The Court supported the position of entrepreneurs.
Why, suddenly, the country where modern law originated (from the Magna Carta of 1215) ceased to adequately assess of the legal reality, and what could be the result of a confusion in the right definition of the cryptocurrency?
Let's start, perhaps, with the latest. In the legal practice, the high uncertainty in the evaluation of an object makes a wide scope for manipulation. "The combination of numbers obtained by complex mathematical calculations" can be anything. Today, the guys from crypto business managed to prove that they won money from mining. Thus they left high taxes. But tomorrow, no one will guarantee that any British department will not submit the cryptocurrency as a property. In this case, the presumption of guilt may be applied to disputes with digital assets. The defendant will have to prove the legality of the origin of each bitcoin in his wallet. Now English justice on the crypto market depends on the personal attitude of the authorities and the court to the subject of law.
The old legal systems were not ready for new economic realities. Therefore, the crypto business goes into small dynamic jurisdictions, for example, in Malta or in Gibraltar. Latter, incidentally, back in 2016, the program "Virtual Currency: Online Regulation" was adopted and developed by the Government in cooperation with CWG, the working group on the cryptocurrencies. Malta is also called the crypto island. In the near future, the authorities of the country, together with business representatives, plan to create the first regulated decentralized stock exchange for trading and placement of the crypto assets.
The cryptocurrency is also out of the usual logical concepts of the British law. Probably, therefore, it is perceived by lawmakers and law enforcement agencies not as something integral, possessing recognized value, but as something written in binary code. Whether the misunderstanding of the nature of the new digital economy or some hidden political motives, are to be blamed on this by scientists. We can only state the fact that the British justice cannot withstand the test of the new digital economy.