The FCA’s consultation process is open until April 5 this year, after which it will finalise the guidance document which will outline which cryptoassets activities it regulates.
The FCA said the final guidance will clarify its expectations for firms undertaking cryptoasset activities in the UK, in order to facilitate their regulatory compliance, as well as put appropriate consumer safeguards in place.
“We are consulting on Guidance for cryptoassets in order to provide regulatory clarity for market participants carrying on activities in this space. The cryptoasset market, and the underlying DLT technology, is developing quickly and participants need to be clear on where they are conducting activities that fall within the scope of the FCA’s regulatory remit and for which they require authorisation,” stated the FCA website, announcing the consultation paper’s release.
The consultation 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 (MiFID II).
• E-Money under the E-Money Regulations.
• Captured under the Payment Services Regulations.
In the guidance the FCA has made it clear that exchange tokens will be outside its regulatory scope.
“This means that the transferring, buying and selling of these tokens, including the commercial operation of cryptoasset exchanges for exchange tokens, are activities not currently regulated by the FCA.”
In effect, this means exchanges or other entities that facilitate transactions of bitcoins, ether,
For cryptoasset activities, such as Security Token Offerings (STOs) that involve cryptoassets which meet the definition of a specified investment as set out in the RAO (and possibly also a financial instrument under MiFID II),
“Where a person is engaged in activity by way of business in the UK, that relates to a security token, or to a token that constitutes e-money, or is involved in payment services, they should consider whether those activities require authorisation,” the FCA said.
The FCA went on to state that it will consult on the transposition of the EU’s Fifth Anti-Money
“Any legislative change will require the FCA to consult on the new activities to be brought into the regulatory perimeter, and the FCA will work with HMT [Her Majesty’s Treasury] on this,” the guidance states.
The FCA added that later this year it will consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors and the government is also planning to consult on whether to expand the regulatory perimeter to include further cryptoassets activities.