On July 31, 2019, the Financial Conduct Authority (FCA), UK’s Cryptoassets Taskforce issued a Final Guidance on the type of cryptocurrencies that fall under its regulatory parameters in a bid to help crypto market participants better understand whether they are subject to its rules and requirements. According to the FCA, the Guidance also has the intent of giving consumers a better understanding of the cryptocurrency markets and the protections they have.
FCA Fostering Regulatory Clarity
Per the FCA’s publication, a Final Guidance that defines the type of blockchain-based virtual currencies that will come under its purview has been issued as a response to the consultation feedback it has received so far.
The agency says the Final Guidance was drafted after a majority of respondents, including fintech startups, large banks, cryptocurrency exchanges, academia, consultancies, trade associations, amongst others, supported its proposals in its draft guidance.
To that effect, unregulated cryptocurrencies or exchange tokens such as bitcoin (BTC) and ether (ETH), which are decentralized and used as a means of exchange fall outside the FCA’s regulatory parameters.
As such, bitcoin trading venues and exchanges, as well as other market participants who only offer a platform for the trade of exchange tokens, are not required to receive authorization first before conducting their businesses.
Cryptos As Legal Tender
Interestingly, the FCA notes that exchange tokens can be used for international money remittance which is a regulated payment and for that reason, a digital currency exchange that facilitates a regulated payment using an exchange token needs to obtain its permission.
Similarly, the FCA says other cryptoassets including utility tokens and stablecoins, can also be used to facilitate regulated payments despite the fact that it classifies utility tokens as unregulated digital assets unless they meet the definition of electronic money.
Security tokens, on the other hand, have been boldly classified as a regulated parameter and the same can be said about e-money tokens which the FCA defines as:
“Electronically stored monetary value that represents a claim on the issuer, issued on receipt of funds for the purpose of making payment transactions, and accepted by a person other than the issuer.“
Requirements for Firms Who Offer Regulated Crypto Assets
Importantly, cryptocurrency firms in the U.K. that either create or issue, buy or sell, or store these cryptoassets which fall under the scope of the FCA’s regulations will have to get authorization from the FCA and adhere to its regulations.
In the same vein, financial advisers, professional advisers, investment managers, recognized investment exchanges, consumers, and consumer organizations that relate to the assets are also affected by the FCA’s statutes.
Consumers are required to identify the virtual currencies that are regulated by the watchdog and take advantage of the FCA Register to ascertain if a company they are about to transact with has been authorized by the FCA to operate its regulated activities.
In related news, on July 25, 2019, BTCManager informed that the United States Senate Committee on Banking, Housing, and Urban Affairs also intends to hold a full committee hearing to examine the regulation of cryptocurrencies.