UK: FCA to Provide Clarity on Crypto-Assets Regulation

On 1^st August, the UK’s Financial Conduct Authority (FCA) published the much-anticipated final guidance on crypto-assets following a response duration of prior commentary. The FCA has now determined that they are in-charge of crypto and which digital assets fall on the shell of their remit.

It has further stated that a large number of assenters had been in support of their earlier mandates on a restrictive approach. In addition to this, the organization noted that very little had been done since the previous versions except for “reframing” the classification of crypto assets to further clarify them for players in the sector.

Ninety-two firms and persons gave feedback concerning this guidance, ranging from crypto exchanges, big banks, issuers and individuals, the FCA said.

Market Participants Required to Understand In-Case Authorization

The new FCA guideline states that the caveat should act as a previous step for market players to understand in-case authorization is required and should be interpreted jointly with PERG (Perimeter Guidance Manual). In cases where the market partakers are unsure and are in a position to get regulatory feedback, initiate support operations such as the sandbox, or Direct Support can give this assistance for requests that are in the said criteria for support. Market participants should also acknowledge accessing appropriate outward advice.

These regulations follow a report published this past fall from a crypto social unit which constituted the FCA, HM Treasury and the Bank of England.

FCA Executive Director of Strategy and Competition, Christopher Woolard, stated in an accompanying status that:

“This is a small, complex, and evolving market covering a broad range of activities. Today’s guidance will help clarify which crypto asset activities fall inside our regulatory perimeter.”

The FCA Cautions Consumers

Consumers have been cautioned by the FCA to remain vigilant on emerging Fintech sectors because of integral risks posed by unregulated crypto assets. Primarily, these assets fall outside the scope of the Financial Compensation Scheme.

The digital assets fall within four separate categories as defined by the FCA. These are:

• Specified investments under the Regulated Activities Order
• e-money on the E-Money Regulations
• seized under the Payment Services Regulations
• the exterior of the rule

In regards to specific tokens, the FCA provided the previous descriptions as given below:

• Security tokens: this category does not change significantly from the earlier directions that we consulted on and refers to those tokens that provide rights and obligations same to specified investments as set out in the RAO, excluding e-money.
• E-money tokens: refers to tokens that are subject to the EMRs, and players should make sure that they have the correct authority. It previously sat amongst the utility tokens category.
• Unregulated tokens: this refers to tokens that do not meet the criteria of e-money, or give the same rights as other investments under the RAO. This includes exchange tokens and utility tokens.