Cavendish Chair Proposes 0.5% Crypto Tax to Boost UK Stock Market

Lisa Gordon, the chair of investment bank Cavendish, has proposed that the UK should begin taxing cryptocurrency purchases to encourage more investment in local stocks, which could potentially boost the country’s economy. Gordon expressed concern that over half of individuals under the age of 45 own cryptocurrencies but do not invest in equities, a trend she finds alarming. She suggested that reducing the stamp duty on equities and applying it to cryptocurrency transactions could sway people to invest their savings in local company shares, thereby stimulating economic growth.

Currently, the UK imposes a 0.5% tax on shares listed on the London Stock Exchange, generating around 3 billion British pounds annually. Gordon believes that a reduction in this tax could encourage more people to invest in equities, which in turn could prompt other firms to go public in the UK. She views cryptocurrencies as "non-productive assets" that do not contribute to the economy, unlike equities, which provide growth capital to companies that employ people, innovate, and pay corporation tax.

According to a November report by the country’s Financial Conduct Authority, cryptocurrency ownership has risen to 12% of adults, with a majority of these owners being under the age of 55. Gordon noted that many individuals have shifted towards saving rather than investing, a trend she believes will not fund a viable retirement. A 2022 survey by the FCA found that while 70% of adults have a savings account, only 38% directly hold shares or hold them through an account allowing nearly 20,000 British pounds of tax-free savings a year. Approximately three in four 18-24 year-olds held no investments.

Gordon is a member of the Capital Markets Industry Taskforce, a group of industry executives aiming to revive the local market. Cavendish, as an investment bank, would benefit from a more vibrant stock market as it advises companies on navigating possible public offerings. The proposal comes at a time when the London stock market has seen one of its "quietest years on record," with just 18 companies listing in 2023, down from 23 in 2022. Many companies have delisted or transferred from the exchange, citing declining liquidity and lower valuations compared to other markets.

Gordon claims that the UK is a "safe haven" compared to markets such as the US, which has faced significant volatility due to economic uncertainties. The proposal to tax cryptocurrency buyers aims to redirect funds towards more stable and productive investments, potentially fostering economic growth and stability. However, the proposal has sparked debate about the role of cryptocurrencies in the economy and the need for a balanced regulatory approach. The UK government is likely to consider this proposal as part of its broader economic strategy, and it remains to be seen how it will address the challenges and opportunities presented by cryptocurrencies.