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 start taxing cryptocurrency purchases to encourage Britons to invest in local stocks, which could potentially boost the country’s economy. Gordon expressed concern that over half of individuals under 45 own cryptocurrencies but do not invest in equities, highlighting a shift in investment preferences that could be detrimental to long-term 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 suggested that reducing this tax on equities and applying it to cryptocurrency transactions could incentivize people to invest in local companies. This, in turn, could encourage more firms to go public in the UK, further stimulating economic activity.

Gordon characterized cryptocurrencies as "non-productive assets" that do not contribute to the economy in the same way that equities do. Equities, she argued, provide growth capital to companies that employ people, innovate, and pay corporation tax, thereby fulfilling a social contract that benefits society as a whole. In contrast, cryptocurrencies do not feed back into the economy in a similar manner.

The Financial Conduct Authority reported in November that cryptocurrency ownership in the UK had risen to 12% of adults, with a majority of owners being under the age of 55. Gordon noted that many individuals have shifted towards saving rather than investing, a trend that she believes will not support a viable retirement. A 2022 survey by the FCA found that while 70% of adults had a savings account, only 38% held shares directly or through an account, and around 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 a decline in listings, 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's proposal reflects a broader effort to integrate cryptocurrencies into the existing financial system while ensuring they contribute to economic growth. By taxing cryptocurrency transactions, the UK could generate additional revenue and encourage investment in more stable and regulated sectors, such as the stock market. This approach aims to balance the speculative nature of cryptocurrencies with the more predictable returns of traditional investments, fostering a more robust and diversified economy.

In summary, the proposal to tax cryptocurrency buyers in the UK is a strategic move to redirect investment towards more stable and regulated sectors, thereby boosting the economy. This initiative reflects a growing awareness of the need to integrate cryptocurrencies into the broader financial landscape while ensuring that they contribute to economic growth and stability.