Trump's Interest in Crypto Tokens: Impact on the UK Market

The reintroduction of Donald Trump to the White House is no less controversial than the first time around. His impact has been felt immediately throughout global financial markets, geopolitical groups like NATO, and perhaps most straightforwardly, cryptocurrency.

Despite being anti-crypto during his first term and calling it a scam, Trump soon changed his tune after receiving hundreds of millions in campaign funding from influential crypto leaders. Trump also made a deal with the Libertarian Party, which gained their backing in return for just one promise: Free Ross Ulbricht, which was profoundly popular among libertarian crypto-lovers.

Beyond support, Trump has also seen crypto as an opportunity to raise some money of his own, launching $Trump and $Melania coins, which shot into the billions overnight.

Before looking at the impact on the UK market, let’s quickly summarise the Trump Administration’s approach. 

The Trump Administration’s View of Crypto

Trump once said that “Tariff” is the most beautiful word in the English language, and it’s this love of tariffs that has left risk assets like Bitcoin in a troubled situation. When the President suggested a more measured approach (e.g. targeted tariffs rather than blanket ones), Bitcoin surged to $87k. This highlights the connection between economic policy and crypto because they simply scare investors, and high-risk assets can react the most.

At the crux of Trump’s crypto revolution is the reclassification of NFTs and coins as ‘collectable’, as opposed to securities. This will have an unthinkably large impact on the regulatory landscape in the US, as the SEC and CFTC will have less oversight. The appointment of Paul Atkins—a crypto advocate—as the SEC chair really sets the tone.

It’s also important to recognise how seriously Trump is proposing crypto as a new US reserve. Despite having global financial hegemony with the US dollar, Trump named Bitcoin, Ethereum, Solana, Cardana and XRP as the proposed five. All five jumped between 10 - 62% in the following days.

The thinking behind these changes is in part to make the US the “crypto capital of the world”. This means that the UK is now relatively more strict on crypto compared to the US, even without UK-specific changes to policy. It also makes the EU’s Crypto-Assets (MiCA) regulation appear at complete odds with the US approach. The initial concern is that many projects, particularly ones looking for high growth and little oversight, will now flood the US.

UK Tax Implications of $TRUMP

Although it soon tailed off, the initial buzz from Trump launching his own meme coin saw a surge from $7 to almost $75 within the first day. Today, it hovers around the $11–12 range, but it’s not just the fall that has British investors worried. For those who exited near the top, there could be grave tax implications because of a change in policy.

HMRC subjects crypto gains to Capital Gains Tax (CGT). It’s not just the sale of crypto back to fiat that realises it, but even the spending of crypto on goods or exchanging it for other coins. More importantly, the annual exemption for CGT dropped dramatically from £12,300 to £3,000 in the 2023-25 year. So, anyone profiting more than £3,000 from the crypto surge that has been occurring since Trump’s victory may have an unexpected tax bill.

Whilst we don’t fully understand yet what a US crypto reserve may look like, issuing government bonds through it may cause concern. Currently, US Treasury bonds for UK citizens are extremely safe (essentially zero risk), and taxable as interest income and exempt from CGT. Crypto-issued government bonds, however, could be a different story, with heightened risk and potentially being subject to CGT tax.

Tightening HMRC laws on crypto with the backdrop of the US decreasing regulations and seeing plenty of growth could also increase non-compliance in the UK. Currently, “nudge letters” are already targeting those who are suspected of under-reporting and encourage voluntary disclosures. They serve as a warning of potential penalties of up to 200% unpaid tax, but in reality, many will try to game the global nature of crypto as a way to keep profits out of sight. Yes, there is a publicly traceable ledger, but there will be attempts to realise those gains (e.g. purchase services) in an anonymous way so the traceable loop never fully returns home.

Market Impact on UK Investors

The rise of Trump’s tokens has invoked a new wave of celebrity-backed cryptocurrencies that are targeting British investors. This ties into the right-leaning “manosphere”, in which the largest podcasts are now dominated by Trump-supporting crypto enthusiasts—some of which, like Logan Paul, are happy to push get-rich-quick crypto ventures. Trump’s official meme coin launch wasn’t only a green flag for those influencers but was a clear message saying that he is one of them. Clearly, legitimate crypto projects will be displeased that this is becoming the association and politicisation of crypto.

UK regulators are therefore fighting a losing battle, despite their previous optimism that the UK could be a leader in regulating a sensible crypto market that puts technology on a pedestal, not speculative volatility. While trying to come down hard on protecting newcomers with cooling-off periods and risk warnings, the US sphere of influence isn’t listening. International regulatory coordination is less likely, too, with Trump’s appetite for isolationism.

The FCA estimates that around 12% of adults in the UK own crypto, though this may be higher now. There remains a healthy crypto industry in the UK that has long-term usability in mind, but an increasingly high proportion of crypto exposure is now coming from less regulated markets like the US. 

The Optimistic Outlook

A crypto reserve in the US could help provide more stability to major coins by growing their market cap and institutional backing. It’s not like the UK is directly opposed to institutional backing either, as late last year saw an unnamed British pension fund allocated 3% of assets to Bitcoin with a 10-year horizon. 

So, despite the divergence of US and UK approaches to regulatory oversight, both are heading in a similar direction of crypto acceptance. And while the FCA and HMRC have their work cut out to quieten the noise from less credible ventures and identify profits from British investors, the growing holdings of crypto among British adults and institutions is a mostly positive outlook.

Conclusion

In light of this continuously evolving global market, choosing the right S21 approver has never been more crucial in navigating the crypto landscape. With shifting regulations, and increasing global divergence, having a trusted expert on hand is invaluable.

Unsure of where you stand? Get in touch with the Englebert team today to get to grips with the UK market.

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