UK FCA warns companies dealing in crypto they need approval

Britain’s Financial Conduct Authority has told firms offering services linked to crypto derivatives that it is “likely” they must comply with its regs or face enforcement action. 

While their purview doesn’t cover cryptocurrencies in general, it is looking to establish itself as the rule-setter for those “dealing or arranging transactions in, advising on or providing other services related to derivatives referencing currencies or tokens issued through an initial coin offering”, according to a statement.

The FCA defines these derivatives in the following classes:

“cryptocurrency futures – a derivative contract in which each party agrees to exchange cryptocurrency at a future date and at a price agreed by both parties
“cryptocurrency contracts for differences (CFDs) – a cash-settled derivative contract in which the parties to the contract seek to secure a profit or avoid a loss by agreeing to exchange the difference in price between the value of the cryptocurrency CFD contract at its outset and at its termination
“cryptocurrency options – a contract which grants the beneficiary the right to acquire or dispose of cryptocurrencies”

“We are aware of a growing number of UK firms offering so-called cryptocurrencies and cryptocurrency-related assets,” the statement begins. It then points out that “cryptocurrencies are not currently regulated by the FCA provided they are not part of other regulated products or services,” it goes on to assert that “Cryptocurrency derivatives are, however, capable of being financial instruments under the Markets in Financial Instruments Directive II (MIFID II).”

It follows a statement late last year from the FCA advising caution to anyone investing in cryptocurrency CFDs, describing them “extremely high-risk, speculative products”.