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

Digital Assets

Cathie Wood’s sponsored Bitcoin ETF sees historic $200 million inflows

The ARK 21Shares Bitcoin ETF (ARKB), co-sponsored by Cathie Wood’s ARK Invest, registered historic inflows exceeding $200 million on Wednesday, signaling a robust appetite among investors for Bitcoin-centric investments.

Digital Assets

Sam Bankman-Fried might see his 25-year sentence halved

Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, was sentenced to 25 years in federal prison by a Manhattan court on Thursday. This comes after he was convicted of defrauding customers and investors, with Judge Lewis Kaplan highlighting the potential future risks posed by Bankman-Fried.

Technical Analysis

EURJPY Technical Analysis Report 28 March, 2024

EURJPY currency pair under the bearish pressure after the pair reversed down from the major resistance level 164.25, which also stopped the sharp weekly uptrend at the end of last year,

Digital Assets

BlockDAG’s Presale Hits $9.9M, MultiversX & MINA Price Predictions Show Green

Read about BlockDAG’s promising $10 prediction and insights on MultiversX Price Prediction as MINA’s potential unfolds.

Digital Assets

Rockstar Co-Founder and All-star Line Up Join Advisory Board to Take Metacade into Post Beta Orbit

Metacade, the revolutionary Web3 gaming platform, prepares to streak out of beta with a slew of ground-breaking initiatives that will redefine the way blockchain games are developed.

Retail FX

Prop firm The Funded Trader shuts down, claims relaunch in April

Prop trading firm The Funded Trader has ceased all operations, with claims for a relaunch in the near future.

Digital Assets

Ethereum-Based Tokenized Real Estate Platform USP Launches On Republic

How This Californian Startup Is Revolutionizing Real Estate Investment through Ethereum-Based Tokenization.

Digital Assets

Sui Spikes in Weekly DEX Volume, Joins Top 10 of All Blockchains

March DEX volume on Sui stands at over $2.88B – up more than 49% from February – with decentralized exchange Cetus and wholesale liquidity layer DeepBook leading.

Digital Assets

Prisma Finance suffers $10 million crypto exploit, attack ongoing

Liquid staking protocol Prisma Finance fell victim to a security exploit on March 28, resulting in nearly $10 million in Prisma mkUSD and wrapped stETH being stolen by hackers.

<