Crypto assets or cryptocurrencies such as Litecoin and Bitcoin are becoming increasingly popular among traders, have been under the surveillance of the Financial Conduct Authority (FCA) for quite a while now.
Despite the risks involved in investments of cryptocurrencies, the number of investors is on the rise. Emerging new technologies are making these assets more popular by making them more accessible as digital investments.
The FCA has repeatedly urged consumers to be careful with their investments in such digital assets. After a long wait for a proper regulatory framework to administer crypto assets, FCA published a set of guidance on crypto assets; with the Policy Statement 19/22.
The guidance stated that via it, the regulator attempted to provide “regulatory clarity” and increased protection to the market participants, by informing them about relevant and significant issues prevailing in the market. The guidance was also published to assist the market participants in understanding the regulations that apply to them.
Simultaneously, it was also intended to assist firms who create, issue, market, trade, store or hold cryptocurrencies; and financial advisers, investment managers, professional advisers and, many others.
The guidance could further be a forerunner to potential new legislation and regulations for crypto assets.
Previously, this year, the FCA produced a framework, classifying the crypto assets. The cryptocurrencies were segmented based on their fundamental structures and their designs (regulated or unregulated). It also contained warnings about the risks like financial instability, cybercrime, and frauds.
In the guidance, the FCA also acknowledged the fast pace of the cryptocurrency market and supporting technologies. They also acknowledged the market participants’ need for clarity on activities which are administered by the FCA and required their authorization; It also stated the extent of their regulatory obligations.
For instance, cryptocurrencies may be considered as specified investments can be unregulated (mostly utility tokens and exchange tokens) or regulated. They can be regulated under e-money following the E-Money Regulations or may be regulated under the Regulated Activities Order. Whichever the case may be, consumers should be able to distinguish between regulated and unregulated cryptocurrencies.
The guidance strictly stated that firms in the UK carrying some specific activities concerning crypto assets must get appropriate authorization from the FCA.
The UK based finance firm, CF Benchmarks, recently acquired a license from the FCA with authorization to operate under the European Benchmarks Regulation’s, Benchmark Administrator. They became the first firm in the domain to hold a cryptocurrency benchmark which would be controlled by the Financial Conduct Authority, UK.
The firm can use CF Benchmarks for any of the products from European finance as soon as the Benchmarks regulation (BMR) from the European Union is entirely functional from 2020.
The FCA’s guidance on Cryptocurrencies will be effective immediately. Although It is not obligatory on the courts, it can be a crypto assets factor when settling disputes.
The FCA has made it clear that the guidance must be known, learned and, followed while conducting on business in the UK soil.