Latest FCA Guidance is prompted by Libra and Hints at Permanent Green Light for Crypto

Once Facebook’s cryptocurrency, Libra, entered the game, it has increased pressure on regulators to take a closer look at cryptocurrencies in general, according to an industry expert.

The Financial Conduct Authority has moved to provide clarity on crypto and went on to publish the latest guidelines on cryptoassets.

Nick Wright, a company specialist in blockchain regulation and licensing said that the latest FCA update was a sign that digital technology is increasingly being takes seriously by the authorities. Wright is working as a director at SolutionsHub.

Expressing his personal opinion on the matter, Wright said: “My personal opinion is that the recent announcement by Facebook regarding the introduction of Libra is putting pressure on regulators to examine, review and form positions on their own appetite to regulate (or not) digital assets and tokens.

“There is an argument to say that the additional clarity offered by the UK FCA should be considered as an acceptance that digital assets are here to stay and that regulation will at some point try to adapt to market sentiment and new technologies.”

Christopher Woolard, executive director of Strategy and Competition at the FCA, said the guidance “will clarify which cryptoasset activities fall inside our regulatory perimeter.”

The latest (PS19/22) guidance classifies Bitcoin and Ethernum exchange tokens, meaning they do not fall within the FCA’s remit. However, there are tokens that do.

Wright added: “Whilst Bitcoin and Ethereum have been classified as ‘exchange tokens’, and therefore outside their remit and scope, other digital tokens/assets have not been so lucky.

“Security and utility tokens will be captured and regulated in some form with the former considered ‘digital assets that provide rights and obligations akin to shares or debt instruments.’

“The issuance of utility tokens, depending on their nature and structure, may meet the definition of e-money in certain circumstances. These tokens will also likely fall under the umbrella of the European Union’s 5th AML Directive which is being merged into UKL law in the latter stages of 2019.

“PS19/22 also provides recommendations for wallet providers, exchanges and trading platforms and that an updated e-money token category, falling within the E-Money Regulations, should be created.

“Despite the recent publication of PS19/22 the UK FCA have already conceded that further clarity will be required for actors and operators within the sector so as to ensure that regulations are clear and that no laws are being contravened.”

More on Financial Conduct Authority

The FCA aims to make financial markets work well so that the consumers get a fair deal. They want the markets to work well for the individual, for business, large and small and for the economy as a whole. FCA manages this by regulating the conduct of more that 59,000. The company is also a renowned regulator for more that 18,000 of businesses.

The strategic position of the FCA is to ensure that the relevant markets function well and their operational objectives are to protect consumers, protect financial markets, and promote competition.

Source:

“Latest FCA guidance is prompted by Libra and hints that crypto is here to stay”, George Miller, August 6, 2019.