UK FCA issued clarifications of cryptocurrency regulations

The UK Financial Conduct Authority (FCA) has recently published the final version of guidelines specifying crypto asset activities that fall under FCA regulation.

Major part of these recently released guidelines was previously already propositioned in a consultation paper CP19, released in January. As it may be expected, the final guidelines do not significantly change the regulatory ground, instead these specify when certain types of crypto assets fall under existing categories.

In these guidelines, the FCA determined main cryptocurrencies such as Bitcoin and Ether as “exchange tokens". The regulator highlighted that such digital currencies do not fall under the regulatory scope of the FCA, however, anti-money-laundering rules shall apply.

The FCA stated that they have received ninety-two (92) responses in regards to the consultation paper from different firms, including banks, trade associations, and crypto exchanges. Most of them supported the proposals, as noted by the FCA.

What is important, the guidance now implements a definition for security tokens, which will fall under the category of “specified investments.” Furthermore, security tokens behave like shares or debt instruments and have ownership rights. Practically everyone who was surveyed agreed with the regulator’s opinion on security tokens in relation to the regulatory aspect.

Utility tokens, on the other hand, do not provide the same kinds of rights as regulated financial instruments and will generally fall outside the scope of FCA, except in cases when they meet the definition of electronic money and fall within a new category of e-money tokens.

The FCA stated:

"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"

Market players should take advantage of the Guidance and use it as the first step to understand how they should treat certain crypto assets, however, final judgments will be determined for each case individually.

The recent regulatory guidance issued by the FCA is a positive step and it is expected to see a more clear and friendly regulation on crypto assets around the world.

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