FCA Crypto Rules: Where Are Your Employees, Your Customers, and Their Crypto Taxed?

But for many businesses, the biggest challenges will sit outside the FCA rulebook.

In a sector built on borderless technology, firms increasingly need to answer three critical questions:

• Where are key decisions being made?
• Where are employees working?
• Where are customers and their digital assets taxed?

Regulation is driving a need for greater substance

The FCA’s framework places greater emphasis on accountability, governance and effective oversight. As a result, firms will need to demonstrate genuine operational substance in the UK, not simply a UK legal entity.

Key considerations include:

• Where senior management is located
• Where strategic decisions are made
• Where risk, compliance and finance functions operate
• Whether governance structures align with regulatory expectations

For many crypto firms, FCA authorisation may require a stronger UK footprint.

Moving talent creates tax considerations

Specialist skills in areas such as compliance, financial crime, risk management, internal audit and operational resilience remain in short supply. The result is often increased international hiring and cross-border movement of employees.

Without appropriate planning, this can create unexpected challenges including:

• Immigration and visa requirements
• Payroll withholding obligations
• Social security liabilities
• Employment law exposures
• Equity incentive taxation
• Cross-border reporting requirements

Many crypto businesses have embraced flexible working arrangements, but employees working remotely from different jurisdictions can create significant compliance obligations that may not always be visible to the employer.

The growing risk of Permanent Establishments

The tax implications extend beyond individual employees.

Where senior personnel perform decision-making, commercial or revenue-generating activities in another jurisdiction, local tax authorities may argue the business has created a permanent establishment (PE), exposing part of the business’s profits to local corporate taxation.

As crypto firms become more regulated and transparent, tax authorities are paying increasing attention to where value is created and where profits should be taxed.

Where Are Your Customers?

The FCA regulates firms. It does not determine how cryptoassets are taxed. That creates a separate challenge for businesses serving international customers.

The FCA’s framework is designed to increase confidence in cryptoassets and stablecoins. However, customers often interact with digital assets across multiple jurisdictions, each with its own tax treatment.

Unlike traditional financial products, there is currently no global consensus on how cryptoassets should be taxed. A customer’s tax treatment can vary significantly depending on where they live, work and hold assets. The same crypto transaction may produce different tax outcomes across multiple jurisdictions.

For firms serving international customers, understanding these differences is becoming increasingly important from both a compliance and customer experience perspective.

One Asset, Multiple Tax Regimes

The crypto sector attracts a highly mobile customer base, including entrepreneurs, investors, executives and digital nomads. Multiple tax authorities may have taxing rights or reporting requirements during the lifecycle of that single investment.

For globally mobile investors and executives, these issues can become highly complex. Crypto may be borderless, but tax authorities are not.

Take a US citizen living in the UK who holds Bitcoin or stablecoins on a US exchange. Although the assets, platform and custody arrangements may all sit outside the UK, HMRC will generally focus on the individual’s UK tax residence rather than where the exchange is located. At the same time, the US may continue to impose tax and reporting obligations based on citizenship.

Even where an individual is eligible for the UK’s Foreign Income and Gains (FIG) regime, this does not remove the need to identify, track and quantify crypto income and gains. Relief may be available, but the underlying transactions still need to be analysed and reported.

As crypto adoption grows, internationally mobile individuals increasingly find themselves dealing with multiple tax authorities, multiple reporting regimes and different approaches to taxing digital assets.

Tax Transparency Is Becoming More Important

Alongside increased financial regulation, tax transparency is becoming a growing focus globally.

International information-sharing initiatives and crypto reporting frameworks are likely to provide tax authorities with greater visibility over cryptoasset ownership and transactions.

As a result, firms will need to consider not only their own regulatory obligations, but also how they manage customer data, reporting processes and cross-border compliance risks.

Customers are increasingly seeking certainty around how their digital assets are treated from both a regulatory and tax perspective, particularly as the sector becomes more mainstream.

Looking Ahead

The FCA’s new crypto and stablecoin regime represents an important milestone in the evolution of digital assets in the UK. However, regulation is only one part of the story.

For crypto and stablecoin businesses, the real challenge often extends beyond governance frameworks and authorisation requirements. Firms must understand where their decision-makers are located, where their employees are working, where their customers are based and, increasingly, where their customers’ digital assets may be taxable.

In a sector built on borderless technology, compliance is no longer just about understanding the rules of one jurisdiction. It is about managing the intersection of regulation, global mobility and international taxation.

How We Can Help

The FCA regime is not just a regulatory project. It is a tax, workforce and operating model challenge.

We help crypto and digital asset businesses:

• Assess whether existing operating models support FCA authorisation requirements
• Manage global mobility, payroll and employment tax obligations for internationally mobile employees
• Identify and mitigate permanent establishment risks
• Review corporate tax implications of governance and decision-making structures
• Support executives and founders relocating
• Advise internationally mobile customers and high-net-worth individuals on the cross-border taxation of cryptoassets
• Prepare for increased tax transparency and reporting requirements

Our experts can help you manage the intersection of regulation, global mobility and international taxation, giving you confidence that your operating model is fit for the future. Get in touch to start the conversation.