Fri. Dec 13th, 2019

FCA

The UK’s Financial Conduct Authority (FCA) is responsible for regulating the financial services industry in the United Kingdom. It has also responsible for regulating many cryptocurrency assets. Full details below.

July 2019: The FCA published its response to the consultation paper published in January of this year. The latest document may be found here Guidance on Cryptoassets: Feedback and Final Guidance to CP 19/3 and the following are select summary points:

  • The FCA recommends using the latest guidance document as the first step in understanding how certain cryptoassets should be treated although states “definitive judgements can only be made on a case-by-case basis”;
  • Further clarity is required between the different types of tokens;
  • Electronic money or ‘e-money’ is a new category that will fall within the FCA responsibility;
  • Utility tokens will generally not fall within the FCA’s remit since they do not grant rights that resemble regulated financial assets. There will be exceptions to the rule when utility tokens resemble electronic money;
  • Security tokens will fall within the FCA’s remit; 
  • The issuance of security tokens does not require a regulatory license (just as it is possible to issue shares without a license). However, if the security tokens are tradable, then the brokers and advisors handling the tokens, and its promotion, will require FCA authorisation and approval;
  • Tradeable security tokens on the capital market will further be considered a ‘transferable security‘ under the EU’s Markets in Financial Instruments Directive (MiFID), and therefore MiFID rules shall also be applicable;
  • Stablecoins that meet definition of e-money will fall within the FCA remit as well;
  • Cryptocurrency-based derivatives such as CFDs, options, futures, and ETNs will be banned because they are not suited to “retail consumers who cannot reliably assess the value and risks.”

January 2019: The FCA releases a document providing preliminary guidance of how it intends to regulate cryptocurrencies in the UK. Full details here: Guidance on Cryptoassets: Consultation Papers 19/3.