David Brown, 28. David is an electrical contractor, experienced in trading cryptocurrency, and accepts it as a payment in his business. We interviewed David about this emerging technology to learn about Bitcoin and other forms of cryptocurrency, how to get involved and why cryptocurrency could be the way forward for financial transactions.

If you feel unfamiliar with some of the terms in this blog, scroll down to the end for a short glossary.

How would you define cryptocurrency, and why is it making the headlines?

I think the reason it’s all over the news is that people are seeing how much wealth is being distributed among those involved.

To understand cryptocurrency such as Bitcoin you need to understand the technology behind it which is the blockchain. Currently, most people use a middleman such as a bank to make a transaction which can take up to 3 days and involve large fees if you are a business. The blockchain allows consumers and suppliers to connect directly, removing the need for a third party. Using cryptography to keep exchanges secure, blockchain provides a decentralized database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers (nodes) that must all approve an exchange before it can be verified and recorded. In the case of Bitcoin, blockchain stores the details of every transaction of the digital currency, and the technology stops the same Bitcoin being spent more than once.

What does ‘mining’ Bitcoins mean?

Mining is an essential component of the blockchain peer-to-peer computer process used to secure and verify bitcoin transactions—payments from one user to another on a decentralized network. Mining involves adding Bitcoin transaction data to Bitcoin’s global public ledger of past transactions.

The technology can work for almost every type of transaction involving value, including money, goods and property. Its potential uses are almost limitless: from collecting taxes, better supply chain management for retail and manufacturing, smart contracts for homes etc. The blockchain could also help to reduce fraud because every transaction would be recorded and distributed on a public ledger for anyone to see. In theory, if blockchain goes mainstream, anyone with access to the internet would be able to use it to make transactions. Currently, 50% of the world population has no access to a bank account so this could be huge.

How did you first get involved with Bitcoin?

I’ve always been interested in new technology from installing the first generation of LED lighting to switching my business to become more focused on the new wave of smart homes and wireless technology such as NEST & HIVE. In Bitcoin, I really liked the idea of fast transactions and the decentralisation aspect so thought it would be good to get into a couple of years ago.

Bitcoin currency with a background of its market value

Is it worth investing in Bitcoin or any other cryptocurrency now?

Most people buying Bitcoin are not aware how the tech works and are only looking to make some fast cash. The transactions and fees are slow and expensive but there are other newer cryptocurrencies that solve these problems, such as Ethereum, Monero and Litecoin. Bitcoin is the original but the other cryptocurrency communities are trying to work out which one will prevail. If investing, some understanding of the cryptocurrency you’re investing in would be a good place to start, e.g. is it private? And who is backing it? They can be purchased on Coinbase website or app using a debit or credit card. After registration you get a Coinbase ‘wallet’ but it is recommended that you move funds to a personal wallet such as Jaxx as they are more secure and have cheaper tariffs.

Due to its volatility Bitcoin has been referred to as pure speculation and a ‘bubble’, do you agree?

Cryptocurrency is here to stay that’s for sure. Yes, bitcoin is in a bubble but that’s not the interesting point. The really interesting question is whether, when, and how it will pop. There have been six bubbles in Bitcoin so far each peaking higher than the previous, each drop landing higher than where the bubble started. Bitcoin grows by bubbles but there are bigger and scarier bubbles in the housing market and stocks etc. Money is cheap and there are no good productive investments that are not already inflated into bubbles. Lots of people have bought in due to FOMO (Fear Of Missing Out) without any understanding of the tech. Yes, it will probably correct sharply at some point in the future. Those who have a sound understanding of the tech and long-term value will hold then we can look at the next bubble.

Cryptocurrency is already used to buy goods, just the other week a software developer in Essex bought a new build home for £350,000 using Bitcoins. Coffee shops and pubs in California and London are accepting cryptocurrency and there is even a Burger King in Holland. The Bitcoin fees are high but there are other cryptocurrencies that are looking to solve this problem.

Finally, do you think cryptocurrency will supplement national currencies or can it replace pounds and dollars altogether?

Yes, with the modern world moving to the Internet and a finite number of bitcoins/altcoins In circulation it makes sense. In the UK and 99% of the world, we use ‘fiat’ currency which has no intrinsic value and is established as money by government regulation. Right now the balance you see at the ATM makes up 97% of all money in the British economy and only 3% of the money is still in that old-fashioned form of cash you can touch. Banks can create money through the accounting they use when they make loans. The numbers that you see when you check your account balance are just accounting entries on the bank computers. These numbers are a liability or IOU from your bank to you, though you can still spend these IOUs as if they were £20 notes. Creating money this way means that with every new loan comes a new debt. This is the source of our mountain of personal debt – not borrowing from someone else’s life savings, but from money that was created out of nothing by the banks. This can’t be sustained for much longer. A decentralised system is the only way forward in my eyes.

P.S. Tax Implications

Tax evasion, fihurs of police officers with handcuffs

If this interview has convinced you to invest in cryptocurrency, we recommend you keep reading about the somewhat lesser known implications of investment in cryptocurrency – tax.

The advent of cryptocurrencies such as Bitcoin is a newly evolving area, and determining their legal and regulatory status is an ongoing process with newly discovered tax implications. It is distinctly different from any other form of investment activity or payment mechanism, and for VAT purposes cryptocurrencies in the UK are treated by HRMC as following:

  • Income received from Bitcoin mining activities will generally be outside the scope of VAT on the basis that the activity does not constitute an economic activity for VAT purposes because there is an insufficient link between any services provided and any consideration received.
  • Income received by miners for other activities, such as for the provision of services in connection with the verification of specific transactions for which specific charges are made, will be exempt from VAT under Article 135(1)(d) of the EU VAT Directive as falling within the definition of ‘transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments’
  • When exchanging Bitcoin for Sterling or for foreign currencies, such as Euros or Dollars, no VAT will be due on the value of the Bitcoins themselves.
  • Charges made over and above the value of the Bitcoin for arranging or carrying out any transactions in Bitcoin will be exempt from VAT under Article 135(1)(d) as outlined above.

So – broadly speaking there will be little or no VAT implication from Bitcoin trading.

Other taxes such as income tax, corporation tax and capital gains tax transactions will hinge on the activities concerning bitcoins and other cryptocurrencies in a similar way as transactions involving sterling or euro are regulated.

Corporation Tax: The incomes and losses on exchange movements between the currencies are chargeable as per the general rules on foreign exchange.

Income Tax: Under general income tax rules, the profit and losses of a non-incorporated business will be taxed.

Importantly, if someone is mining bitcoins then HMRC regards this as a trade and will charge any profits to income tax and national insurance. Income and expenses would need to be calculated in sterling each year with the profits reported to HMRC and tax duly paid. Any expenses claimed would need to relate solely and specifically to the trade of mining.

If the bitcoins have been purchased HMRC will regard any increase in value as being liable to capital gains tax. The tax will only crystallise when the bitcoins are converted into another currency, be it sterling or dollars or even another cryptocurrency.

Glossary of Terms

Altcoins – a combination of two words: “alt” and “coin”; alt is short for alternative and coin signifies currency. Thus together they imply a category of cryptocurrency that is alternative to the digital currency Bitcoin.

Bitcoin – a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Well-known for being the first and thus original cryptocurrency.

Blockchain – a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.

Coinbase – Coinbase is a bitcoin broker that provides a platform for traders to buy and sell bitcoin with fiat money. In addition to its primary operation as a broker, Coinbase is also a bitcoin exchange and wallet provider.

Cryptocurrency a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

Cryptography – a method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it. Cryptography not only protects data from theft or alteration but can also be used for user authentication.

Fiat money – a currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of.

HIVE & NEST– companies selling smart home products to ensure home appliances are all connected to improve daily living.

Jaxx– a multi-chain wallet that offers support for seven different cryptocurrency assets.

Ledger – an accounting record in which financial transactions are recorded.

Mining – the process by which transactions are verified and added to the public ledger, known as the blockchain, and also the means through which new bitcoins are released. Anyone with access to the internet and suitable hardware can participate in mining.

Node – a connection point for data transmissions on a communications network.

Wallet (Cryptocurrency) – a secure digital wallet used to store, send, and receive digital currency such as Bitcoin.

To learn more about our accountancy service for individuals, small businesses, and charities in Glasgow, call 0141 334 1318 or email us at hello@bnassociates.co.uk

The interview represents the views of David Brown, and professional financial advice should be sought prior investment.


Revenue and Customs Brief 9 (2014). Bitcoin and Other Cryptocurrencies.

Investopedia (2018). Financial Dictionary. Available at: https://www.investopedia.com/dictionary/