UK Financial Conduct Authority Issues Crypto Guidelines

The UK Financial Conduct Authority (FCA) has this week released its long-awaited guidelines for the classification of crypto assets. The new regulations seek to clarify which asset classes fall under the jurisdiction of the financial watchdog, and which do not.

The newly released guidelines do not differ much from the original proposal which was tabled back in January except they now have a proper definition for security tokens and place them under the category of “specified investments”. In addition to this the guidelines also accept that security tokens can behave in the same way as shares and have ownership rights.

Cryptocurrencies such as Bitcoin and Ether are considered as “exchange tokens” and are not regulated as a part of the new rules, but national and EU-wide anti-money laundering laws will still apply.

In order to draw up the legislation, the FCA undertook a consultation process and had 92 responses from an assortment of firms, banks, trade associations and cryptocurrency stakeholders. The regulatory body said that most of the feedback they received was positive and in support of the proposals that have now been accepted.

Utility tokens have not been given the same rights as regulated financial instruments and most will fall outside of the remit of the FCA with the exception of those that meet the definition of electronic money. These will be classified under a new category for e-money tokens.

“Any token that is not a security token, or an e-money token is unregulated. However, market participants should note certain activities that use tokens may nevertheless be regulated, for example, when used to facilitate regulated payments.”

Some stablecoins are also likely to fall under the e-money definitions and would therefore be supervised by the FCA.

“Market participants should use the Guidance as the first step in understanding how they should treat certain crypto assets, however definitive judgements can only be made on a case-by-case basis.”

Executive Director of Strategy and Competition at the FCA Christopher Woolard, said in a statement:

“This is a small, complex and evolving market covering a broad range of activities. Today’s guidance will help clarify which crypto asset activities fall inside our regulatory perimeter.”

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