The UK Financial Conduct Authority (FCA) published a Consultation Paper on crypto regulation this week. In it, the regulator specifies its proposals on how crypto activities will be regulated and supervised by the authority. For this purpose, FCA uses the framework developed by the UK Cryptoassets Taskforce for different types of
Scope Of FCA Crypto Regulation Proposal
FCA’s Consultation Paper was issued in order to provide regulatory guidance for market participants carrying on crypto activities. According to the paper, the
It may be a criminal offense to carry on regulated activities without the relevant authorizations.FCA Consultation Paper
In line with the Taskforce, the FCA categorised cryptoassets into three types of tokens;
- Exchange tokens: these tokens are not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They are, usually, a decentralized tool for buying and selling goods and services without traditional intermediaries. These tokens are usually outside the perimeter.
- Security tokens: these are tokens with specific characteristics that mean they meet the definition of a Specified Investment like a share or a debt instrument and are within the perimeter.
- Utility tokens: these tokens grant holders access to a current or prospective product or service but do not grant holders rights that are the same as those granted by Specified Investments. Although utility tokens are not Specified Investments, they might meet the definition of e-money in certain circumstances, in which case activities in relation to them may be within the regulator’s perimeter.
According to the findings of the Taskforce, 56 projects in the UK that have used ICOs to raise funds. This accounts for less than 5% of projects globally.
Potential Harm To Investors
From the FCA’s point of view, cryptoassets pose a range of substantial risks to consumers. This can include fraudulent activity, as well as the immaturity or failings of the market infrastructure and services.
Leveraged derivatives, like Contracts for Differences (CFDs) referencing
Fraudulent activity is likely to exist across the range of
The FCA is asking for comments on the Consultation Paper (CP19/3) by Friday 5 April.