UK Financial Regulator Launches Consultation Paper on Crypto, Taking Steps Towards Regulation

The UK’s financial regulator, the Financial Conduct Authority (FCA), has recently launched a consultation paper on cryptoassets, which will set out the cryptocurrency-related activities it regulates, and could lead to a ban sale of crypto derivatives to retail investors.

The consultation paper, titled “Guidance on Cryptoassets,” is looking to provide regulatory clarity for cryptocurrency market participants, with the consultation period set to end on April 5 of this year. After it ends, a statement with financial guidance is set to be released.

The move comes in response to an industry-wide request for greater clarity, and according to CryptoNewsReview to the Cryptoasset Taskforce’s recommendation for additional guidance on existing regulations. In a press release announcing the move, the FCA noted that while the number of consumers investing in cryptoassets is still “relatively small” it has been increasing.

Christopher Woolard, the executive director of Strategy and Competition at the regulator, was quoted as saying:

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.

According to the FCA, the final version of the paper is set to help “market participants understand whether the cryptoassets they use are within the regulatory perimeter.” It added that it should help market participants “better understand whether they need to be authorised and what rules or regulations apply to their business.”

Per the FCA cryptocurrencies could be placed into three potential categories: exchange tokens, security tokens, and utility tokens. The exchange tokens, in the FCA’s eyes, are those that aren’t issued or backed by a central authority, and whose intended use is to be a medium of exchange – like bitcoin.

Security tokens are cryptoassets that would fall under the FCA’s regulations, or that could be seen as “Specified Investments” under the UK’s Regulated Activities Order (RAO). Utility tokens, on the other hand, would be those giving users access to a product or service, without giving them rights over them.

The country’s financial regulator has warned that consumers should approach the cryptocurrency industry with caution, while being “prepared to lose money.” It reportedly explained consumers may be unaware they aren’t protected by the government’s services when it comes to cryptoassets.

Back in October the FCA proposed a ban on the sale of crypto derivatives to retail investors. Per its press release, it will look into banning the sale of these products linked to specific types of cryptocurrencies to retail investors.

The regulator has also noted cryptoassets have the “potential to bring benefits to markets, firms and consumers.” As such, it noted it wants to “encourage innovation in the interest of consumers.”

OneCoin Denies Being a ‘Hybrid Ponzi-Pyramid Scheme’

The controversial OneCoin organization has recently responded to the Central Bank of Samoa, claiming it isn’t a “hybrid ponzi-pyramid scheme” as it doesn’t fir the definition of these schemes, and that it is a centralized, closed cryptocurrency.

According to the Samoa Observer, the Central Bank of Samoa claimed OneCoin is a “hybrid ponzi-pyramid scheme” that “laundered money through New Zealand to Samoa.” It also claimed the organization was targeting local residents through churches.

The organization, widely believed to be running a pyramid scheme using the cryptocurrency space, sent a statement to the Observer defending itself, claiming it’s neither a pyramid nor a Ponzi scheme. It’s worth noting individuals associated with OneCoin have been arrested and charged in various countries, including China and India.

In its response, OneCoin argued that Ponzi schemes see the revenue of old investors be “generated through the investment of new investors,” and that it doesn’t require its agents, known as Independent Marketing Associates (IMAs), to recruit others in order to earn bonuses.

Its defense revolves around IMAs not being “obliged to incur any additional expenses or recruit a new IMA,” and that they are rewarded for the “value of [their] sales,” not for recruiting new agents.

The organization added pyramid scheme regulations are these for “consumer protection,” and that its IMAs aren’t consumers. This, as when they join the organization they sign a contract classifying them as “self-employed business owners.”

The users which are part of the OneLife Network are NOT consumers. They are IMAs, meaning they are self-employed business owners.

As CoinDesk notes, OneCoin argues it isn’t a pyramid scheme because its agents aren’t seen as consumers and, as such, it can’t be classified under a dictionary definition of a pyramid scheme, and doesn’t force its IMAs to recruit new agents, although they’re incentivized to do so.

OneCoin, instead, argue it is a “centralized, closed cryptocurrency” with strict anti-money laundering (AML) and know-your-customer (KYC) rules, which make it “much more compliant than decentralized [cryptocurrencies].”

As reported, OneCoin’s leaders Ruja Ignatova and Konstantin Ignatov were recently indicted by the U.S. Attorney for the Southern District of New York (SDNY) on charges of wire fraud, securities fraud, and money laundering. Konstantin was arrested in March of this year.

Moreover, earlier this month former OneCoin investor Christine Grablis filed a lawsuit against the organization’s promoters, with Grablis’ attorney claiming OneCoin’s founders created a multi-billion dollar ‘cryptocurrency’ company based completely on lies and deceit.”