FCA clarifies crypto assets regulation

By Katey Pigden

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Aug 02, 2019

The FCA aims to provide greater clarity on crypto assets regulation with the publication of its final guidance document to help firms understand what they need to do to be compliant.

The regulator says most respondents to its consultation earlier this year supported the proposals put forward.

It has made some amendments for the final guidance to be clearer on what is and is not regulated.

The FCA will not regulate “exchange tokens” such as bitcoin or their exchanges and has warned consumers to be “mindful” of the absence of certain regulatory protections when considering purchasing certain crypto assets.

FCA executive director of strategy and competition Christopher Woolard says: “This is a small, complex and evolving market covering a broad range of activities. Today’s guidance will help clarify which crypto asset activities fall inside our regulatory perimeter.”

Unregulated crypto assets including bitcoin, ether and XRP, are not covered by the Financial Services Compensation Scheme and consumers do not have recourse to the Financial Ombudsman Service.

Responding to the news, accountancy and business advisory firm BDO head of fintech in the financial services team Matt Hopkins says: “It’s positive to see the FCA clarifying its approach to regulating crypto assets, but the speed of progress remains very slow and deliberate. There is a risk that the FCA will end up being too reactive in protecting retail investors.

“It’s very understandable that the FCA does not want to ‘legitimise’ some of the crypto exchanges by regulating them – that risks giving false assurance to retail investors about how secure the products are.

“There is quite a fine line for the FCA to tread in protecting consumers while not stifling innovation, but the direction of travel is towards regulation. The FCA should make sure it is ahead of the curve, and not forced to regulate exchanges by a scandal later.”

Earlier this month, the government announced that a crypto asset regime will be established with support from the FCA to create one of the most “comprehensive global responses” to the use of crypto assets in illicit activity.

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