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Need to know . . . Is my cryptocurrency in danger?

Need to know .  .  .  Is my cryptocurrency in danger?

The spectacular explosion of Sam Bankman-Freed’s crypto empire has rocked the digital asset world, which has already recovered from a summer of uncertainty caused by the collapse of the associated Terra and Luna tokens.

As the saga continues to unfold, the exact extent of the damage done to the unregulated world of speculative cryptocurrency is still unclear, but UK retail savers who invest their money in the asset class are likely to hit a rocky road when it comes to value. their investments. Those with funds held on the affected exchanges may not be able to withdraw them at all.

I am a crypto owner in the UK and have read about contagion concerns. Are my assets at risk?
The burgeoning Bankman-Fried group focused on the now-defunct cryptocurrency exchange FTX, whose collapse its new boss John Ray III called the worst corporate collapse he had seen in his 40-year career.

Retail investors who have used FTX for trading and as storage for their cryptocurrency are unlikely to receive their funds from a non-existent exchange. But the problem is more global. Other exchanges, including BlockFi, which has been hit hard by FTX, have suspended withdrawals in recent days. Genesis Trading, which allows customers to lend their coins, also announced it would stop withdrawing funds from its lending arm earlier this week.

Even if your cryptocurrency is on an exchange that allows you to withdraw it, don’t expect a high price. Bitcoin has fallen to less than $17,000 from $60,000 a year ago. Coins with more direct impact on Bankman-Fried’s business, such as Solana or FTX’s own FTT cryptocurrency, were hit even harder.

Is there anything I can do to protect my money?
Changpeng Zhao, head of FTX’s former competitor Binance, is among those who have called for users to “self-custody”, i.e. store the private keys to their cryptocurrency in a personal digital wallet (albeit while promoting the official Binance crypto wallet). This avoids the risk of storing them on a centralized exchange.

While this may be useful in the future, those whose money is stuck on the exchanges who have raised the drawbridge – permanently or not – have no real redress.

What are UK regulators doing to help?
In the world of cryptocurrencies, regulation is often viewed with derision. Bankman-Fried himself said in an interview with Vox that regulators “do not protect customers at all.” However, FTX only proposed industry standards last month.

Those who have lost money will find little comfort in the libertarian ideals of crypto as the asset class is largely unregulated in the UK. The city’s Financial Conduct Authority maintains a registry of regulated firms, but it only deals with anti-money laundering policies. There is no protection from the Financial Services Compensation Scheme, which helps clients of bankrupt banks or building societies, so if the coin you bought or the company that held it explodes, you will have no way to seek help.

The Financial Services and Markets Bill, which is currently moving through the House of Commons, will provide the FCA with greater regulatory oversight of the crypto sector, but it is not expected to pass until next year.

If I decide to sell now and take my profit, will I pay taxes?
The latest government guidance states that you may be required to pay capital gains tax on the sale of assets if your profit exceeds your tax-free allowance, based on the profit from each transaction you make. Certain eligible expenses may be deducted, including certain transaction fees and advertising costs for the buyer or seller.

On a practical note, major UK banks have begun to take a tougher stance on the payments their customers make on cryptocurrency exchanges due to the high levels of fraud. TSB has banned them since last year, and Santander and Virgin Money announced they are tightening their approach this month.

No lender has yet taken steps to stop customers from cashing out their cryptocurrencies, but those who see an opportunity to buy more speculative coins when the price is low may find that their bank is unwilling to help them.

Written by khirou

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