UK’s FCA publishes guidance on cryptoassets
The UK’s Financial Conduct Authority (FCA) has released a policy statement setting out the FCA’s final guidance on cryptoassets and their treatment within the FCA’s regulatory remit (the “Guidance”).
A link to the Guidance can be found here.
Who needs to read it?
The guidance is relevant to those who are:
- issuing, creating, buying, selling, holding or storing cryptoassets
- marketing cryptoasset products and services
- investment managers, recognised investment exchanges, multi-lateral trading facilities and organised trading facilities in the cryptoasset market
- professional advisers of cryptoasset issuers and participants, and
- any other participants in the cryptoasset market.
What does it cover?
The Guidance is the result of the FCA’s consultation on cryptoasset guidance. It summarises the feedback received by the FCA following the consultation and sets out the FCA’s responses.
The FCA has proceeded with the previous guidance that was consulted on, with some drafting changes to improve clarity based on the feedback received. In particular, the Guidance reframes the FCA’s taxonomy of cryptoassets to help market participants better understand whether tokens are regulated, and where they fall outside our remit. The final guidance does not drastically alter the regulatory landscape. Instead, it specifies when certain types of crypto assets fall under existing categories.
Broadly, the FCA works through the following taxonomy of digital tokens:
|Unregulated tokens||Exchange tokens||Primarily used as a means of exchange e.g. bitcoin|
|Utility tokens||Provide access to a current or prospective service or product e.g. a form of pre-paid voucher|
|Regulated tokens||Security tokens||Provide rights and obligations akin to ‘specified investments’ i.e. traditional investment products|
|E-money tokens||Meet the definition of electronic money under specified regulations|
The guidance also gives a number of useful case studies.
Fitting digital tokens into existing categories for regulatory purposes is not an exact science, as we found out when we published our original paper “Tokens of our Affection” (here) in September 2017, applying the New Zealand “financial product” and “security” definitions under the Financial Markets Conduct Act 2013 to the universe of tokens, coins and other virtual assets then in circulation. We remain of the view, however, that the New Zealand legislation is helpful and relatively straightforward in how it applies in most cases, giving clarity to participants in our market.
Guidance such as the FCA’s is helpful in developing and testing our thinking as new product categories (e.g. stablecoins) emerge and are refined.
If you have any questions in relation to the FCA’s cryptoasset guidance or virtual assets and cryptocurrencies generally, please contact one of our experts.
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