UK Government Faces Pressure to Tax Crypto, Boost Stock Market

The UK government is under significant pressure to introduce a crypto tax policy aimed at redirecting investments into domestic equities. Lisa Gordon, chair of investment bank Cavendish, argues that taxing cryptocurrency transactions could channel funds into the stock market, thereby strengthening the UK economy. She posits that equities contribute more significantly to economic growth compared to the volatile nature of digital assets.

Currently, the UK imposes a 0.5% tax on equity trades, generating approximately £3 billion annually. Gordon suggests reducing this charge by introducing a crypto tax policy, which could incentivize investors to shift their portfolios towards equities. This realignment, she believes, would stimulate business growth, create jobs, and enhance the overall economic landscape.

As of 2025, 12% of UK adults own cryptocurrency, with a majority of these investors being under the age of 45. This demographic trend highlights an increasing online investment culture. However, a concerning 10% of crypto investors do not conduct any research before investing, raising issues about financial security.

The UK share market has faced challenges over the past two years, with only 18 firms floating in 2023 compared to 23 in 2022, and 88 delisting due to liquidity concerns. This downturn has prompted experts like Gordon to advocate for a strategic shift to boost investor confidence.

The cost-of-living crisis has also impacted investment activity, with 44% of UK adults reducing their investments and nearly 25% selling holdings to cover bills. This underscores the need for measures like a crypto tax policy to encourage prudent investment choices.

The Financial Conduct Authority (FCA) has intensified its focus on digital assets, requiring UK companies to report crypto assets to regulators by 2025 to assess financial stability risks. Concurrently, tax laws around crypto are evolving.

Starting in April 2025, the UK government will increase Capital Gains Tax (CGT) rates. The basic rate will rise from 10% to 18%, and the higher rate from 20% to 24%. These changes will apply to profits from asset sales, including cryptocurrency transactions, aligning crypto taxation with traditional investment policies.

If enacted, a crypto tax policy could drive greater participation in the stock market, potentially leading to more firms going public and attracting foreign investors. However, critics warn that overtaxing digital assets could stifle innovation in the blockchain industry. The UK has already outpaced the EU’s markets in the Crypto-Assets (MiCA) framework, making it crucial for policymakers to balance investor protection with industry growth.

The debate surrounding the crypto tax policy continues as the government evaluates its potential impact on the stock market. While proponents believe it could redirect investments towards traditional assets, opponents caution about its potential to hinder innovation in the crypto space. The UK economy could benefit from a shift away from cryptocurrency towards stocks, but the policy's popularity will depend on overall economic conditions, regulatory clarity, and investment sentiment.