UK Financial Conduct Authority Warns Firms About Crypto Derivatives

UK Financial Conduct Authority Warns Firms About Crypto Derivatives

The UK Financial Conduct Authority (FCA) has issued a warning to firms that deal with cryptocurrency derivatives, as they likely require authorization from the agency to do business.

Posted Friday on the official FCA website, the statement advised that cryptocurrency derivatives have the qualities necessary to be considered tradeable assets. As the statement reads, this means that firms involved with regulated activities using cryptocurrency derivatives are subject to FCA guidelines, as well as any relevant provisions indirectly applicable to European Union regulations.

Despite the FCA declining to acknowledge cryptocurrencies as either currencies or commodities in regards to regulation, the statement notes that it is ”likely” that firms offering cryptocurrency derivatives require authorization to do so.

This would potentially require companies holding initial coin offerings (ICOs) to comply with the FCA guidelines, although the statement noted that this would depend on the nature of the token offered.

Other areas outlined that would fall within the FCA’s regulatory parameters include cryptocurrency futures, cryptocurrency contracts for differences (CFDs) and cryptocurrency options.

The final warning of the statement precautioned firms that neglecting to authorize activities under the FCA’s regulation is a criminal offense. The statement finished, ”Authorized firms offering these products without the appropriate permission may be subject to enforcement action.”.

The FCA on the industry

In 2016, the FCA said that there were no plans in place to regulate the blockchain industry for the time being, as it needed what it described as space to develop.

However, the agency has been outspoken on its unfavorable view towards cryptocurrencies and ICOs. Chief executive of the FCA Andrew Bailey said in December 2017 that Bitcoin investors must be prepared to ” lose all your money”. He compared cryptocurrency investments as similar to gambling.

December 2017 also saw the FCA announce a further study into ICOs, scheduled to determine if there was a need for further regulatory action depending on the applicability of UK laws to the investment model of ICOs.

 

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