Cryptoassets – Image by Sergei Tokmakov Terms.Law on Pixabay In February 2021, Tesla controversially announced that it would start to accept Bitcoin as payment for its vehicles, only to “U-turn” a couple of months later following exposure of the environmental impact of Bitcoin ‘mining’. Tesla is not the only business to have accepted Bitcoin, in fact there are several multinational businesses which have accepted or accept payment in Bitcoin – including Wikipedia, Microsoft, Burger King, KFC, Subway and Pizza Hut.

Today, some estimate that over 2 million UK residents hold some form of cryptoasset. Many businesses have considered taking the plunge and accepting this new form of payment. The reason: this opens a door to a new market. Furthermore, doing so can be a badge of being technologically advanced and cutting edge.

This article, therefore, examines some of the legal issues which businesses should consider if they are looking to accept cryptoassets as payment for their goods and services.

What is a cryptoasset?

A cryptoasset is a digital asset. It is often referred to as a cryptocurrency. The most well-known cryptocurrencies are Bitcoin and Ethereum. But, as with most new technologies, this is an evolving area developing at pace.

Cryptoassets are, typically, characterised as tokens or coins. They use ‘blockchain’ or distributed ledger technology as the mechanism of record.  In the UK, the authorities regard cryptoassets as property. They are not legal tender (or ‘fiat’).

Exchange and regulation

Some businesses will decide to retain any cryptocurrency paid for goods and services in that cryptocurrency. Such a cryptocurrency would show on the balance sheet as an asset.

In contrast, others will choose to convert any receipt (of a cryptocurrency as payment) to fiat, possibly converting at the earliest possible opportunity via a cryptocurrency ‘exchange’. Yet, there are practical implications to consider when looking at converting any cryptocurrency:

  • the time consumed to convert
  • the risk inherent in fluctuating exchange rates (akin to FX, but often with greater volatility).

In addition, there are legal issues to consider. The authorities, to date, do not regulate cryptocurrencies in the same way as they do fiat currencies. For this reason, if a business does decide to accept cryptocurrencies as a form of payment, that business must stay alert and be up-to-date with the latest guidance and regulation.

To make matters more complex, this is an area subject to fast-paced change. In the UK the Financial Conduct Authority (FCA) regulates financial services. Most observers ever more change, both in the short and long term, as the FCA begins to assess the governance behind the various different forms of cryptoasset.

As of today, the FCA does not regulate most crypto-exchanges. This means, if something (for example, a trade) goes wrong, a business is unlikely to have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS).

To confirm the risks, the FCA issued a warning in June 2021 regarding the Binance exchange, as well as a more general one about investing in cryptoassets. The Bank of England has also issued its own warnings and guidance regarding:

  • the use of cryptoassets in the absence of regulatory protection
  • the dangers of speculative trading and market volatility.

As the majority of cryptoassets remain unregulated, the FCA’s capabilities has limits as to what it can do to protect the businesses (or the general public). Despite this, it is clear the government and regulators wish to deliver change, albeit in the medium to long-term.

For instance, the government, by way of its UK Cryptoasset Task Force, has emphasised its intention to bring some crypto currencies under existing financial promotion regulation. Specifically, this Task Force is exploring the regulation of stablecoins (currently banned by the FCA).

It is probable there will soon be moves to bring cryptoassets within the FCA’s remit. This will involve stronger regulation as well as greater protection. That said, no one yet knows what these changes will look like in detail, though many foresee this area to be susceptible to rapid changes, especially if businesses adopt and accept cryptocurrencies as a mainstream activity.

Money laundering concerns

Cryptocurrencies present significant risks of money laundering.  Some businesses – such as estate agents, financial advisors, accountants and lawyers – already must perform anti-money laundering checks. It is worth remembering, therefore, that for any business (or individual) it is an offence to engage in money laundering. This means businesses must stay fully informed about the source of funds in respect of any customer using cryptocurrency for a payment.

For business owners it is not a defence to turn a blind eye and ‘just’ accept the cryptocurrency payment. There must be consideration as to whether each payment in cryptocurrency could derive from the proceeds of crime or from someone subject to international sanctions. While not everyone who uses cryptocurrency to pay is a criminal, too many criminals have used unregulated landscapes – like cryptocurrencies – to move money, because there is so little accountability or visibility.

At the present time the acceptance of a cryptocurrency for payment would have a significant impact on those businesses which are required to carry out specific anti-money laundering checks and prove the source of funds, presenting a prohibitive barrier to their mainstream use. All businesses should, therefore, ensure they have instituted the proper checks and measures to protect themselves from accusations of harbouring proceeds of crime. This applies especially when accepting large payments in cryptocurrency and/or transactions associated with high-risk jurisdictions.

Legal, accounting and tax

If a business plans to accept cryptocurrency it should work closely with professions which understand:

  • the implications of using cryptocurrencies
  • the possible legal, tax and accounting impacts.

To take a first example: from a legal perspective a business’ terms of business need review and amending so as to reflect the distinct legal issues associated with accepting any given cryptocurrency. Business terms, as a minimum, should address:

  • compatibility of software and hardware
  • expiry of any links
  • refunds (since it is much more complex to deal with an overpayment made in a cryptocurrency).

Similarly, the transaction value for products or services often links to a fiat value. This means the business terms must address how to:

  • value a cryptocurrency
  • ensure these sufficiently cover the goods and services involved.

In the future, it may be that goods and services will possess values expressed in one or more cryptocurrencies. So far few businesses have reached this stage yet.

From a tax and accounting perspective, a business will need someone experienced in dealing with cryptocurrencies so as to be able to advise:

  • about the correct tax treatment for a particular transaction
  • how a transaction shows in the accounts.

For example, as a practice, A City Law Firm (see below) has assisted numerous cryptocurrency companies that have struggled to locate appropriate professionals experienced in the challenges presented by cryptocurrencies.


No business can ignore environment considerations. In this context, businesses should remember there can be a significant environmental impact associated with a cryptocurrency. To ‘mine’ certain cryptocurrencies is incredibly energy intensive (it is estimated that 65% of Bitcoin mining takes place in China, a country which uses much coal for electricity generation). This has a negative impact on the environment.

Businesses and their managers must, therefore, make themselves aware that some cryptocurrencies can have a negative impact on the environment. Simultaneously, the environment is a consideration to take into account when planning the direction of a business and the image it wishes to portray.

It is clear that there are still many concerns regarding volatility, regulation and the environmental impact of cryptoassets. Whilst innovation and risks are often the hallmark of a successful business, it is paramount that you have detailed and accessible advice before making any crypto related decisions. If you have any questions or need any guidance in this exciting new area, please reach out to the experienced and friendly team here at ACLF who would be delighted to assist you.

ACLF logoIn the meantime, if you can’t wait, you can contact us directly for impartial advice by visiting our website or emailing [email protected] 

Karen Holden is the Managing Director & Founder of A City Law Firm who practise both commercial law and litigation, having been admitted to the roll in 2005. If you require further advice or assistance, please do not hesitate to contact [email protected] 

A City Law Firm Limited is a leading entrepreneurial law firm in the city of London, with a dynamic and diverse team of lawyers. It was awarded most innovative law firm, London 2016 and Business Law firm 2017. They specialise in start-up business law, the tech industry, IP and investment.


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