On 31 July 2019, following the consultation launched in January 2019, the FCA published its feedback and final perimeter guidance on the regulatory treatment of cryptoassets.

The guidance aims to give clarity on the types of cryptoassets that fall within the FCA’s regulatory remit and the resulting obligations on market participants and regulatory protections for consumers. It also provides information on those cryptoassets that are outside of the FCA’s perimeter, and what this means for market participants and consumers.

The key points of interest are:

  • the FCA’s taxonomy of cryptoassets comprises e-money tokens, security tokens (including ‘equity’ and ‘debt’ tokens), and unregulated tokens (which includes exchange tokens such as Bitcoin and utility tokens such as those used for a specific purpose that do not constitute security tokens or e-money tokens);
  • the FCA will be a supervisor for the purposes of the anti-money laundering regime to be brought in by the fifth Money Laundering Directive, which will cover cryptoassets and exchanges. The FCA will consult later in 2019 on its approach as a “supervisor”;
  • activities by certain individuals within authorised firms relating to unregulated cryptoassets may be covered by the conduct rules of the Senior Managers and Certification Regime; in particular, the FCA would be able to take action against those individuals for breaches where the conduct is regulated by these rules;
  • any firms using cryptoassets to facilitate regulated payments must ensure that they have the correct permissions and follow the relevant rules and regulations. This includes, but is not limited to, the Payment Services Regulations 2017, and from 1 August 2019, PRIN and BCOBS of the FCA Handbook (this is already applicable to FSMA authorised firms);
  • for ‘conditional’ or ‘hybrid’ tokens, which may take on the qualities of different categories of token at any given time, the FCA took the view that “the regulatory treatment depends on the token’s intrinsic structure, the rights attached to the tokens and how they are used in practice. If the token at a point in time reaches the definition of an e-money token or a security token, then it will fall under regulation”; and
  • more generally, the FCA noted that “the use of DLT systems creates questions about certain activities and processes like custody, and settlement. While not perimeter issues (and therefore out of scope for the PS), we recognise these areas are impacted by DLT. We are monitoring developments in these areas, and stand ready to engage with market participants as the market matures”.

The FCA is currently consulting on a proposed prohibition on the sale of investment products to retail clients that reference cryptoassets, which is due to close on 3 October 2019.

You can read the FCA feedback and final guidance here.


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