FCA looking to clear up cryptocurrency derivatives confusion
The UK’s Financial Conduct Authority (FCA) has waded into the cryptocurrency derivatives arena with an attempt to clarify who or what needs to be authorised.
The regulator says it is aware of a growing number of UK firms offering so-called cryptocurrencies and cryptocurrency-related assets.
As indicated in its feedback statement on distributed ledger technology (DLT), cryptocurrencies are not currently regulated by the FCA “provided they are not part of other regulated products or services”.
The FCA says these derivatives are, however, capable of being financial instruments under the Markets in Financial Instruments Directive II (MIFID II), “although we do not consider cryptocurrencies to be currencies or commodities for regulatory purposes under MiFID II”.
Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable European Union regulations.
If you’re involved in those ubiquitous initial coin offerings (ICOs), this will likely require authorisation by the FCA. This includes futures, contracts for differences (CFDs) and options.
This may well lead to confusion from some fintech firms, and the FCA adds that if you are “unsure” whether your firm requires authorisation, the FCA’s general guidance on the regulatory perimeter in PERG may be helpful. The handbook is here if you need assistance.
Under pressure
The FCA’s statement is a small part of a long list of stories and news about cryptocurrencies. Few of us will have failed to notice the endless regulations and pressure being exerted on digital currencies.
We won’t cite every example, as there is no space or time, but on 4 April, the Australian Transactions and Reporting Analysis Centre (AUSTRAC) ordered digital currency exchange (DCE) providers to register online to meet anti-money laundering (AML) and counter-terrorism financing (CTF) obligations.
In terms of ICOs, these also got some grief recently. According to digital asset assessment agency DigRate, one out of three are failing.
