The UK’s financial regulator, the Financial Conduct Authority, is today consulting on guidance, which, once finalised, will set out the cryptoasset activities it regulates, and could extend the expected ban on the retail sale of crypto derivatives to other cryptoassets.The consultation is in response to industry request for greater clarity, and to the Cryptoasset Taskforce’s recommendation that the FCA provides additional guidance on the existing regulatory perimeter.
Christopher Woolard, executive director of Strategy and Competition at the FCA, explained: “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.”
In its press release, the FCA said that “While numbers are still relatively small, an increasing number of consumers are investing in cryptoassets. Consumers should approach cryptoassets with caution and be prepared to lose money.”
It continued to explain that consumers may be unaware of the limited regulatory protections for cryptoassets services that fall outside the FCA’s regulatory remit, such as the lack of recourse to the Financial Services Compensation Scheme and the Financial Ombudsman Service.
In October the FCA proposed a ban on the sale of derivatives, such as futures and options, based on crypto assets to retail investors after concluding that “crypto assets have no intrinsic value and investors should therefore be prepared to lose all the value they have put in”. The regulator said in its press release today that it will consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors.
It also said that the Government is planning to consult on whether to expand the regulatory perimeter to include further cryptoassets activities, so it seems likely that derivatives is not all it is planning on regulating.
On a positive note, the regulator says that “cryptoassets have the potential to bring benefits to markets, firms and consumers” and that although it should address the harms from cryptoassets, it also wants to “encourage innovation [that is] in the interest of consumers.”