UK Financial Regulator CP19/3: Guidance on Cryptoassets

The FCA in the UK has carried out work on cryptoassets, both as part of a broader UK Cryptoasset Taskforce and independently to achieve their objectives. There is consultation paper Read Here which is the next step in the FCA’s work on cryptoassets and sets out details on where different types of cryptoassets might fall in the regulatory perimeter.

 

The stated goal of the Financial Conduct Authority’s (FCA) paper on cryptocurrency is to provide more regulatory clarity on the subject for market participants. The consultation period on crypto, which the paper initiates, is scheduled to end on April 5, 2019, after which a policy statement with final guidance is set to be released.

In its introduction to the paper, the FCA declares that the final version is meant to “help market participants to understand whether the cryptoassets they use are within the regulatory perimeter.” The regulator explains:

 

“This will alert market participants to pertinent issues and should help them better understand whether they need to be authorised and what rules or regulations apply to their business.”

 

The final Guidance will help market participants to understand whether the cryptoassets they use are within the regulatory perimeter. This will alert market participants to pertinent issues and should help them better understand whether they need to be authorised and what rules or regulations apply to their business.

This paper sets out where tokens are likely to be:

  • Specified Investments under the Regulated Activities Order
  • Financial Instruments under the Markets in Financial Instruments Directive II
  • E-Money under the E-Money Regulations
  • captured under the Payment Services Regulations

Who this applies to

  • firms issuing or creating cryptoassets
  • firms marketing cryptoasset products and services
  • firms buying or selling cryptoassets
  • firms holding or storing cryptoassets
  • financial advisers
  • professional advisers
  • investment managers
  • recognised investment exchanges
  • consumers and consumer organisations

The FCA’s crypto asset guidance places cryptocurrencies into three potential categories, namely exchange tokens, security tokens and utility tokens. So-called exchange tokens, the regulator writers, are those “not issued or backed by any central authority and are intended and designed to be used as a means of exchange.”

Security tokens, on the other hand, are assets that likely fall under RAO and are “within the perimeter” of FCA’s regulations. Finally, coins referred to as utility tokens are those that give users access to a product, but do not grant the same rights as security tokens.

The FCA then revealed that it is investigating 18 companies over cryptocurrency use.

Also in December, the U.K. tax collection service published its first detailed tax legislation for private cryptocurrency holders following a lengthy consultation period.

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Posted 23 Jan 2019
By James