The FCA releases Crypto Consultation Paper
On January 23rd the UK regulator, the FCA, released its consultation paper for cryptoassets. The FCA is now seeking active stakeholder involvement in the development of the market. The consultation paper will be of interest to an array of crypto players and anyone issuing or intending to issue cryptoassets, firms marketing or trading cryptoassets, and the firms holding or storing cryptoassets, ie, digital wallets, will be directly affected by the report. Financial advisers will also be interested in the outcome, as although many of their clients have expressed an interest in crypto, investing is still difficult and fraught with regulatory risk. This is as advisors are currently lacking up to date guidance in how to assess the suitability and appropriateness of these instruments.
Currently in the UK and globally there is a need for regulatory clarity for many market participants carrying on activities in the crypto space. The market has been developing quickly, and regulation often struggles to keep up with innovation. Although recent events in the space (ie falling prices) have been reducing interest globally, crypto will likely be around for a while yet, and valid regulatory frameworks are necessary both to support innovation and to protect consumers. There are likely many projects currently being undertaken that fall within the scope of the FCA’s regulatory remit and for which authorisation is necessary but has not been obtained. It can be both a civil criminal offence to carry on regulated activities without the relevant authorisations under section 19 of the Financial Services and Markets Act. So the importance of regulatory guidance for participants should not be underestimated.
It is important to remember that while the guidance sections in the Handbook represent the FCA’s views, it does not bind the legal system and statute can take precedence. However, guidance, can sway legal opinion and interpretation, and may aid the enforcement of contracts. 2019 should see clarity (in the UK at least) where certain cryptoassets fall within the regulatory system. This should allow stakeholders to have increased certainty around meeting regulatory standards and be more confident of consumer protection. The FCA encourages firms to seek expert advice if they are unsure whether the products they offer fall within the regulatory perimeter.
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