FCA Consults On Cryptoassets Guidance
The FCA is today consulting on guidance, which, once finalised, will set out the cryptoasset activities it regulates.
— FCA (@TheFCA) January 23, 2019
The guidance will help firms understand whether their cryptoasset activities fall under FCA regulation. Firms will have a better understanding of whether they need to be authorised and can ensure they are compliant and have appropriate consumer safeguards in place.
The consultation is in response to industry request for greater clarity, and to the Cryptoasset Taskforce’s recommendation that the FCA provides additional guidance on the existing regulatory perimeter.
Christopher Woolard, executive director of Strategy and Competition at the FCA, commented:
“This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t. This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should.”
While numbers are still relatively small, an increasing number of consumers are investing in cryptoassets. As the FCA has previously made clear, consumers should approach cryptoassets with caution and be prepared to lose money. Consumers may be unaware of the limited regulatory protections for cryptoassets services that fall outside the FCA’s regulatory remit, such as the lack of recourse to the Financial Services Compensation Scheme and the Financial Ombudsman Service.
While cryptoassets have the potential to bring benefits to markets, firms and consumers, there remains considerable risks to markets and consumers. This is an important first step in delivering the outcomes of the Cryptoasset Taskforce, as well as in our own work to address the harms from cryptoassets and encourage innovation in the interest of consumers.
Later this year the FCA will consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors. The Government is planning to consult on whether to expand the regulatory perimeter to include further cryptoassets activities.
The FCA is asking for comments on the Consultation Paper (CP19/3) by Friday 5 April.
Response from CryptoUK
CryptoUK Chair Iqbal V. Gandham said:
“We welcome the FCA’s recognition that it needs to provide clarity and certainty to cryptoasset firms on its regulatory perimeter. This is an important first step towards proportionate, well-designed regulation for our fast-growing industry.
“While recognising that it is the FCA’s role to prevent consumer harm – also reflected in CryptoUK’s own Code of Conduct – it is imperative that policymakers balance this with a framework which enables the sector to grow, attract inward investment and supports the UK as a global hub for the industry, as we’ve seen in other forward-thinking markets.
“The paper acknowledges that only a small proportion of the world’s crypto exchanges are based in the UK compared with elsewhere. We firmly believe this will change with a proportionate and balanced regulatory framework, which would give crypto businesses the reassurance and security needed to base themselves here.
“Today’s consultation is helpful in outlining where cryptoassets fall into existing regulation, but HMT’s forthcoming consultation will prove an important next step in exploring the legislative changes needed to broaden the FCA’s remit to cover the unique qualities of cryptoassets, which existing regulation is ill-equipped for.”
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