FCA outlines proposals on cryptoasset regulation, unauthorized activities to be considered criminal offense

Maria Nikolova

“If you carry on regulated cryptoasset activities involving security tokens, you will need to make sure you are appropriately authorised or exempt”, the FCA says.

The UK Financial Conduct Authority (FCA) has earlier today published a Consultation Paper on the regulation of cryptoassets, in which it specifies its proposals on how such activities will be overseen.

The FCA uses the framework developed by the Taskforce for different types of cryptoassets. In line with the Taskforce, the FCA has categorised cryptoassets into three types of tokens;

Categories of cryptoassets

  • Exchange tokens: these are not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They are, usually, a decentralised tool for buying and selling goods and services without traditional intermediaries. These tokens are usually outside the perimeter.
  • Security tokens: these are tokens with specific characteristics that mean they meet the definition of a Specified Investment like a share or a debt instrument as set out in the RAO, and are within the perimeter.
  • Utility tokens: these tokens grant holders access to a current or prospective product or service but do not grant holders rights that are the same as those granted by Specified Investments. Although utility tokens are not Specified Investments, they might meet the definition of e-money in certain circumstances (as could other tokens), in which case activities in relation to them may be within the perimeter.

“If you carry on regulated cryptoasset activities involving cryptoassets that meet the definition of a Specified Investment as set out in the RAO, i.e. security tokens, you will need to make sure you are appropriately authorised or exempt”, the FCA says.

This is the same regardless of technology – if you are carrying on a regulated activity, it is likely you will need to be authorised, the FCA explains.

The regulator also elaborates on the consequences in case of carrying out regulated activities without any permissions.

Section 19 of FSMA sets out the ‘general prohibition’. The general prohibition states that no person may carry on a regulated activity, or purport to do so (claim to do so), unless they are an authorised person, or they are an exempt person. Firms carrying on regulated activities in relation to cryptoassets, as with any firms carrying on regulated activities generally, must make sure they have the correct authorisation.

Section 23 of FSMA sets out the legal consequences for breaching the general prohibition. It provides that a person who contravenes the general prohibition is guilty of an offence and may face up to 2 years’ imprisonment or an unlimited fine, or both.

A breach of the general prohibition is a criminal offence and carries a maximum penalty of 2 years imprisonment or an unlimited fine, or both.

The FCA is asking for comments on the Consultation Paper (CP19/3) by Friday 5 April.

Read this next

Retail FX

Stephen Kalayjian launches educational and community platform TradeEZ

TradeEZ has partnered with online broker TradeZero to provide chart overlays that can be accessed on the TradeZero platform. In the future, the firm will be looking to partner with some of the largest firms around the world.

Retail FX

LiteFinance launches new mobile app on Google Play

The mobile app allows users to trade and copy professional traders’ positions and gain access to trading chat rooms.

Technology

ECXX taps OneTick for data management and analytics

OneTick is asset class-agnostic and currently has customers across FX, equities, futures, CFDs, FI, and options.

Industry News

$1.5 million: SEC fines BNY Mellon Investment Advisor for misstatements and omissions about ESG

Investors are increasingly focused on ESG considerations when making investment decisions.

Digital Assets

Mercuryo reaches 3 million users amid crypto payments’ US and Asia expansion

“The opportunities for linking crypto and fiat currencies are abundant. From crypto projects that require fiat solutions (like fiat on and off ramps and IBANs), through to crypto for traditional fiat systems, and solutions for fintech companies that enable clients to buy or sell crypto within their own infrastructure.”

Retail FX

Maltese watchdog warns of bogus broker Perfect Choice Trade

The Malta Financial Services Authority (MFSA), the regulator responsible for the oversight of the forex  sector in the Mediterranean island, today issued a warning against a forex broker that offers its services without having the authorization to do so.

Digital Assets

Dukascopy warns of fake website impersonating its cryptocurrency

Switzerland’s forex bank and broker, Dukascopy, today warned against a fraudulent website that have been falsely claiming affiliation with its ‎authorized brand.‎

Uncategorized

Freetrade raises £30 million to fund business expansion

Freetrade, which calls itself a challenger stockbroker, has raised £30 million in debt financing led by a clutch of existing investors.

Digital Assets

Crypto assets under management at lowest point since July 2021

Crypto investment products registered outflows for a second consecutive week, the bulk of which came from bitcoin funds, according to data from digital asset manager CoinShares.

<