UK Financial Conduct Authority Publishes Consultation Paper On Cryptoasset

News, Regulation | January 24, 2019 By:

The UK Financial Conduct Authority (FCA) has published a consultation paper for cryptoassets that aims to help firms understand whether their crypto-related activities fall under FCA regulation.

Titled “Guidance on Cryptoassets,” the paper is in response to industry request for greater regulatory clarity, and to the Cryptoasset Taskforce’s recommendation that the FCA provides additional guidance on the existing regulatory perimeter. Once finalized, crypto firms will have a better understanding of whether they need to be authorized and can ensure they are compliant and have appropriate consumer safeguards in place.

According to the paper, cryptocurrencies could be considered specified investments under the Regulated Activities Order, fnancial instruments under the Markets in Financial Instruments Directive II, e-money under the E-Money Regulations, or captured under the Payment Services Regulations. Regulations will be applied to firms issuing or creating cryptoassets, marketing cryptoasset products and services, buying or selling cryptoassets, holding or storing cryptoassets, as well as financial and professional advisers, investment managers, recognized investment exchanges and consumer organizations.

The FCA said that it is planning to consult on whether to expand the regulatory perimeter to include further cryptoassets activities. In addition, it will consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors later this year.

“While cryptoassets have the potential to bring benefits to markets, firms and consumers, there remains considerable risks to markets and consumers,” the paper said. “This is an important first step in delivering the outcomes of the Cryptoasset Taskforce, as well as in our own work to address the harms from cryptoassets and encourage innovation in the interest of consumers.”

Christopher Woolard, executive director of Strategy and Competition at the FCA, said that the crypto industry is a small but growing market and they want both industry and consumers to be clear what is regulated, and what isn’t.

“This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should,” Woolard said.

The consultation period is scheduled to end on April 5, and the the final text of the guidance is expected to be released in summer 2019.