TL;DR: The UK Financial Conduct Authority (FCA) released a 55-page policy document regarding cryptocurrencies on Wednesday, July 31st, 2019. It’s described as “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,” which 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.”
UK Financial Conduct Authority Final Guidance on Cryptoassets
Enthusiasts can be excused if they’re starting to feel footsteps gaining on them. In the last month alone, anecdotal evidence exists for what appears to be world governments taking real notice of cryptocurrencies, and hardly any of it good news. Even the President of the United States openly condemned their existence, and subsequent hearings have shined dramatic light on money’s future in ways the ecosystem has never seen.
Paranoia might’ve compounded when a sudden update to the FCA’s formal cryptoasset stance appeared. Guidance on Cryptoassets, Feedback and Final Guidance to CP 19/3, Policy Statement PS19/22, July 2019 is actually a follow up to its Consultation Paper from earlier this year. It was then given-over for public comment, and the Final Guidance is its taking into account of feedback, presumably.
“The cryptoasset market, and the underlying DLT technology, is developing quickly,” the FCA noted, “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.” More than a dozen areas are examined, and, while broad, the Final Guidance’s tone isn’t belligerent or necessarily prohibitionist compared to its Spring outright ban on crypto derivatives.
We have Some Concerns
As far as anyone can tell, crypto mania hasn’t exactly overwhelmed British investment circles, yet FCA director Nick Cook told Reuters, “We have some concerns around some of the harms that consumers can be exposed to.”
The agency ultimately provides analysis to the government finance ministry, which can then use the information to either formulate law or tighten regulations at some other level. “The finance ministry said in an emailed comment that the guidance was welcome and that it was planning to consult on unregulated cryptocurrencies later this year,” Reuters explained further.
Interestingly, and maybe key to their principal worries on the subject, Security tokens, utility tokens, and stablecoins were all distinguished, and the FCA appears to be drawing something like a taxonomy of tokens. Its “e-money category,” for example, on page 19, supposedly allows the FCA “to accurately reflect the business models and tokens we are seeing in the market, and describe how they interact with the UK Cryptoasset Taskforce’s taxonomy. However, as the cryptoasset market evolves, we need a flexible approach to ensure our regulation remains accurate and appropriate. We have decided to make drafting changes to the Guidance to create a category of cryptoasset in the taxonomy that reflects those tokens that reach the definition of e-money. A new e-money token category will better illustrate where tokens fall under regulation. 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.”
DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.
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