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Cryptoassets Guidance Consultation

11 February 2019

FCA Consults on Guidance for Cryptoassets Activities

The FCA has started the consultation process on providing a Guidance document in relation to the cryptoassets activities that they regulate.

What is the Cryptoassets Guidance for?

The Cryptoassets Guidance will aim to help firms better understand if their cryptoassets activities should fall under regulation of the FCA and thus have a better understanding of whether regulatory permissions need to be sought out from the regulator to ensure they are compliant.

The financial industry had requested greater clarity on this topic and this guidance is in response to this request in addition to the Cryptoasset Taskforce’s recommendation that the regulator provide further guidance on the current regulatory parameters for cryptoassets.

Whilst still small, an increasing number of consumers are investing in so-called cryptoassets and the regulator has, in recent times, stressed that consumers should “approach  cryptoassets with caution and be prepared to lose money”.

Whilst the FCA acknowledges that cryptoassets have the capacity for brining benefits to participants within financial markets, they still remain concerned about the “considerable risks” cryptoassets pose to markets and consumers.

CP19/3: Cryptoassets Guidance Consultation

As mentioned above, a consultation paper- CP19/3: Guidance on Cryptoassets - was recently published by the FCA and is the next step in the work on so-called ‘cryptoassets’ by the regulator.

The relatively new cryptoassets market is developing at a very quick rate, along with the underlying distributed ledger technology (DLT) that supports it. Thus this is a market that the FCA feels they need to address to ensure participants are aware on where crypto-related activities are covered within the scope of the FCA’s regulatory remit and for which activities require authorisation.  

Hopefully once the finalised Guidance has been decided upon, this will then help market participants to understand whether the cryptoassets they use are within the regulatory perimeter of the FCA or not. In turn, this will ensure that market participants remain compliant with what rules and regulations apply to their business.

For those wishing to comment on the consultation, the closing date for comments is 5th April 2019.

Next Steps:

Whilst the feedback to the current Consultation CP19/3 is epected in the summer, later on this year, it is also expected that the FCA will consult upon banning the sale of derivatives linked to certain types of cryptoassets to retail investors.

Additionally, the UK Government is planning to consult upon whether the regulatory perimeter for additional cryptoassets activities should be expanded.

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