{"id":22145,"date":"2022-12-08T11:41:08","date_gmt":"2022-12-08T11:41:08","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=22145"},"modified":"2025-09-04T15:48:39","modified_gmt":"2025-09-04T14:48:39","slug":"whats-the-good-faith-rule-in-crypto","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/blog\/whats-the-good-faith-rule-in-crypto\/","title":{"rendered":"What’s the good faith rule in crypto?"},"content":{"rendered":"\n

So, what\u2019s the good faith rule and how does it apply to crypto? Does it apply at all? Find out below where we\u2019re answering all of the burning questions. \ud83d\udd25<\/p>\n\n\n\n

What\u2019s the good faith rule?<\/h2>\n\n\n\n

In the world of stocks, bonds and shares, the good faith rule is a commonly-used trading term.<\/p>\n\n\n\n

The good faith rule means that when you buy a security<\/a> (i.e a stock or bond), you can\u2019t sell it until the cash you used to purchase it has \u2018settled\u2019.<\/p>\n\n\n\n

\ud83d\udea8 After selling your security, it can take up to two days for cash to settle in your account (kind of like the period between returning a purchase and the money arriving back into your bank account). <\/p>\n\n\n\n

So whilst waiting for the cash to settle, you can<\/em> purchase another security, but you can\u2019t<\/em> sell the new security until the funds from your first sale have become fully available. \ud83d\udea8<\/p>\n\n\n<\/div> \n\n

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Confused? We\u2019ve got an idea! \ud83d\udca1<\/h4>\n

<\/p>\n

Meet Joe. Joe has recently got into buying and selling stocks. His account balance is \u00a30, but he plans to sell his Apple stock.<\/p>\n

<\/p>\n

He gets \u00a33,000 for his Apple stock, and buys Microsoft stock whilst waiting for his cash to settle. The cash will take about two working days to become available to trade with.<\/p>\n

<\/p>\n

Now you might think, \u2018why is Joe allowed to buy more stocks with cash that hasn\u2019t settled – isn\u2019t that breaking the good faith rule?\u2019 But actually, it isn\u2019t.<\/p>\n

<\/p>\n

This <\/em>is breaking the good faith rule \ud83e\udee3\u2026<\/p>\n

<\/p>\n

Joe decides to sell his Microsoft stock the next day (remember, the cash from his Apple stock still hasn\u2019t settled as it takes two working days to do so). Bad move Joe!<\/p>\n

<\/p>\n\n <\/div>\n<\/div> \n\n

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Still a bit baffled? Well, that\u2019s pretty much the reason you can only complete sales with available cash. It causes too much confusion otherwise!<\/p>\n\n\n\n

Does the good faith rule apply to crypto?<\/h2>\n\n\n\n

Actually, no! Funnily enough the good faith rule doesn\u2019t apply when buying and selling crypto. Crypto isn\u2019t regulated in the same way as other securities (yet, anyway).<\/p>\n\n\n\n

Forex trading for example, is regulated by the Financial Conduct Authority<\/a> (FCA). These are the watchdogs who supervise the financial market. The FCA implement rules that tackle:<\/p>\n\n\n\n