The UK Financial Conduct Authority (FCA) has declared its intention to define its policy on cryptocurrencies before the end of the year. Britain’s financial regulator made the announcement in its 2018/2019 business plan, six months after issuing a warning stating that firms offering cryptocurrency derivatives must be authorised.
UK Regulatory Interest in Cryptocurrencies
While it is aware of a growing number of UK firms offering cryptocurrencies and cryptocurrency-related offerings, the FCA’s regulatory remit is restricted to cryptocurrency derivatives such as cryptocurrency futures, cryptocurrency contracts for differences and cryptocurrency options.
This means that for the time being, only firms carrying out what can be classified as regulated activities in relation to crypto derivatives or securitised token sales require authorisation by the FCA. Inevitably, this leaves something of a regulatory blind spot which UK authorities are eager to address.
In a statement the FCA said:
Cryptocurrencies themselves (i.e. those designed primarily as a means of payment/exchange) are not currently within our regulatory perimeter. However, some models of use or packaging cryptocurrencies bring them within our perimeter, making the landscape complex…We will work with the Bank of England and the Treasury as part of a taskforce to develop thinking and publish a Discussion Paper later this year outlining our policy thinking on cryptocurrencies.
Underlining the growing visibility of cryptocurrencies with UK regulators, the parliamentary Treasury Committee opened a Digital Currencies Enguiry in September with the aim of establishing the role of digital assets in the UK, and identifying any opportunities and risks they bring for consumers, businesses and government.
It will examine the potential impact of distributed ledger technology on financial institutions, including the central bank, and financial infrastructure. And it will also scrutinise the regulatory response to digital currencies from the Government, the Financial Conduct Authority, and the Bank of England. Ultimately, the aim is to find out how regulation can be balanced to provide adequate protection for consumers and businesses without stifling innovation.