The UK’s independent financial regulator, the Financial Conduct Authority (FCA), has revealed in a press release (Jan 23) that it is consulting on a guidance for what it calls “cryptoasset activities”.
When finalized, the guidance will set out which cryptoasset activities will fall under FCA regulation, and help firms to better understand which businesses will be so classified.
The consultation paper comes as part of a response to request for greater clarity from the industry, and to the Cryptoasset Taskforce’s recommendation for FCA to provide further guidance on the area. The UK’s Cryptoasset Taskforce consists of HM Treasury, FCA, and the Bank of England. It was formed in March 2018 to study cryptoassets and distributed ledger technology (DLT), as well as their market impact so as to work towards a regulatory approach.
Christopher Woolard, executive director of FCA’s Strategy and Competition, said, “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.”
The content of the FCA consultation paper includes definitions on key concepts of cryptoassets, an overview of the UK market, assessment of harm, actions taken so far, and intended future actions for the purpose of mitigating harm. Some of this harm could come from cryptoasset volatility, or “lack of transparency” which makes them difficult to valuate.
However, FCA is also sensitive towards “unintended consequences of our intervention”. It explains in its paper saying, “We have tried to make sure that our Guidance is as clear and complete as possible so we don’t create inappropriate barriers to entry, or conflicts with our aims and objectives”.
FCA welcomes public comments on its consultation paper (CP19/3) by Friday, April 5. Later this year, FCA says it will also consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors.