UK Financial Watchdog – Dysfunctional cryptocurrencies fall outside scope of regulation but security tokens don’t

The FCA has been looking into cryptoassets over the last couple of month and issued the Guidance on Cryptoassets, a policy statement to set out details on where different types of cryptoassets might fall in the regulatory perimeter. FCA said crypto markets were highly dysfunctional. It’s currently up to consumers to understand the risks associated with investing in unregulated such as Bitcoin, Ether, and other cryptocurrencies would have no intrinsic value and offer consumers a few protections. In any way, the FCA stated that cryptocurrencies fall outside the scope of its powers.

A combination of market immaturity, volatility, and a lack of credible information or oversight raises concerns about market integrity, manipulation, and insider dealing within cryptoasset markets.

FCA Guidance on Cryptoassets

The treatment of cryptocurrencies by regulators is in focus after Facebook unveiled plans for its Libra coin. While the FCA did not mention Libra in its guidance, it said that some “stablecoins” — a form of cryptocurrency, like Libra, backed by assets such as fiat currencies — could fall under its rules in certain circumstances. According to Reuters, the FCA could not say how Libra would be treated because its structure, design and operating model were still to be determined, Cook said.

Security Tokens are subject to regulation

Other types of cryptos, such a security tokens — cryptographic coins that provide rights and obligations such as shares or units in funds — were subject to rules, the FCA said. As such, firms issuing them would need authorization.