The Financial Conduct Authority (FCA) has not yet provided guidance on NFT’s specifically with regards to regulation in the United Kingdom (UK). However, the FCA has distinguished between regulated tokens and unregulated tokens.
Regulated tokens include security tokens which fall under the definition of specified investments under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Regulated tokens also include e-money tokens which satisfy the definition under the Electronic Money Regulations 2011.
Unregulated tokens include exchange tokens which can be bought, sold, and held such as cryptocurrencies like Bitcoin. Unregulated tokens also include utility tokens which provide access to a specific service or product.
It initially appears as though an NFT would be a utility or exchange token and therefore be unregulated. However, an NFT could possibly provide rights and obligations similar to specified investments which could blur the line between regulated and unregulated tokens.
With regards to tax in the UK, Her Majesty’s Revenue and Customs (HMRC) have not yet provided any guidance for the current or future tax treatment of NFT’s specifically. It is possible that an NFT might be classed as a crypto-asset which currently requires the payment of capital gains tax in the UK.
If you have any further questions about NFTs, please get in touch with the team today.