Response to HM Revenue and Customs Call for Evidence: Taxation of Stablecoins

In this episode we present an audio version of Bitcoin Policy UK’s response to HMRC’s Call for Evidence on the taxation of stablecoins, originally published on 6 May 2026. The paper argues that if HMRC recognises stablecoins as payment instruments deserving lighter tax treatment, then the same logic should also apply to Bitcoin when it is used for everyday payments.🔍 The Core Problem: Bitcoin Payments Trigger Capital Gains TaxUnder current UK rules, every time someone spends Bitcoin, even buying a coffee, it can create a capital gains tax (CGT) event.That means users may need to: Calculate sterling-equivalent acquisition and disposal values  Track transaction histories  Maintain detailed records  Potentially report activity to HMRC Bitcoin Policy UK argues that this creates: Significant administrative friction  Deterrence to real-world payment usage  Very little meaningful tax revenue ⚖️ The Central Argument: Treat Payment Activity Like Payment ActivityThe submission argues that Bitcoin should not automatically be treated as a speculative investment when it is functioning as a medium of exchange.BPUK proposes a usage-based framework: Retail payments → treated similarly to money/foreign currency  Speculative trading → taxed normally  Long-term investment → standard CGT rules apply The key point is that function should matter more than asset category.💡 Why Bitcoin QualifiesThe paper argues that Bitcoin already operates as a meaningful payment network in the UK: Bitcoin accounts for a significant share of UK crypto payments activity  Lightning Network infrastructure enables instant, low-cost settlement  UK businesses already use Bitcoin payment processors and merchant networks The consultation’s rationale for stablecoin payment relief therefore applies equally to Bitcoin.📉 “Regulatory Theatre” and the Bed-and-Breakfasting ProblemOne of the paper’s strongest claims is that the current regime creates complexity without generating meaningful revenue.Many users already lawfully: Spend Bitcoin  Immediately repurchase the same amount  Reset their cost basis (“bed-and-breakfasting”) As a result: HMRC collects very little CGT from genuine payment activity  Users still face substantial compliance burdens BPUK argues this is effectively “regulatory theatre”.🌍 International CompetitionThe paper also highlights how other jurisdictions are moving more aggressively: The Czech Republic eliminated CGT on long-held Bitcoin  Germany exempts crypto gains after certain holding periods  Several US states have passed Bitcoin rights legislation The warning is clear - without reform, the UK risks losing: Talent  Capital  Innovation  Payment infrastructure leadership 📈 The “Velocity Multiplier”A major economic argument in the submission is the idea of a velocity multiplier.BPUK argues that removing CGT friction would: Increase transaction frequency  Encourage merchant adoption  Expand economic activity  Ultimately increase VAT receipts The paper suggests this could more than offset any minimal reduction in CGT collection.🏛️ Policy RecommendationBitcoin Policy UK strongly supports: A full CGT exemption for cryptoasset payments used for goods and services  A framework based on economic function, not issuer or denomination  Inclusion of Bitcoin alongside stablecoins where genuine payment utility exists The submission warns that limiting relief only to sterling stablecoins would create artificial market distortions and ignore existing Bitcoin payment ecosystems.🧠 The Bottom LineThis paper frames the issue as bigger than tax simplification.According to BPUK, the UK now faces a strategic choice: Preserve outdated treatment built around speculative assumptions, or  Recognise the emergence of digital payment infrastructure and position Britain as a global leader in crypto payments policy The future of payments may be digital.The question is whether the UK intends to lead or follow.📄 Read the full written paper here:👉  Response to HMRC Call for Evidence: Taxation of StablecoinsTo find out more about Bitcoin Policy UK's work and how you can get involved, visit:https://bitcoinpolicy.uk/