FCA Publishes Consultation Paper on Cryptocurrencies

By Swati Kishore

UK’s financial regulatory body, the Financial Conduct Authority (FCA) released a consultation paper titled ‘Guidance of Cryptoassets’ on January 23, 2019. The paper is drafted to regulate the activities related to crypto assets, once finalised.

‘Guidance of Cryptoassets’ is awaiting feedback from the market. Thereafter, the consultation paper will serve as the guiding light for participants in the crypto markets. With the help of the paper, they will be able to understand if they are using the cryptocurrencies in compliance with the regulations.

The consultation paper will also enable businesses in the emerging crypto markets to understand whether certain regulations apply to the operations of their business or not. The guidance charts out the regulation of cryptos which are considered as,

“‘Specified Investments’ under the Regulated Activities Order (RAO), ‘Financial Instruments’ such as ‘Transferable Securities’ under the Markets in Financial Instruments Directive II (MiFID II), or captured under the Payment Services Regulations (PSRs), or the E-Money Regulations (EMRs). It also covers where crypto assets would not be considered ‘Specified Investments’ under the RAO.”

As per the FCA, the paper is released to meet the growing demands for regularity clarity surrounding cryptocurrencies. The consultation paper takes forward the recommendations made by UK’s crypto asset Taskforce.

In order to finish the guidance, the Financial Conduct Authority has asked for opinions from crypto market participants. The 10 week consultation period will end on April 5, 2019.

The Executive Director of Strategy and Competition at FCA, Christopher Woolard, elaborated on the consultation paper 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.”

With the growing need for regulations, surrounding crypto assets, this consultation paper by the FCA comes as a welcome surprise for businesses functioning in the domain.

Once there is more clarity, the governments will be able to protect the investors effectively. While the crypto market is still in its nascent stage, however, the number of participants, especially retail investors has been growing steadily.

After the successful completion of the consultation period, the final text of the consultation paper will be published by the FCA in the summer of 2019 by taking into account the feedback received.