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FCA promises "greater clarity" over Crypto regulation

31 January 2019. Published by Ashley Daniells, Associate

The Financial Conduct Authority (FCA) has made further progress in relation to the regulation of cryptocurrencies such as bitcoin, in an attempt to tackle the growing market. The aim of regulation will be to provide greater clarity to both the industry and consumers.

Decentralised digital currencies such as Bitcoin have remained unregulated, despite becoming more prevalent in our day-to-day lives. But is this all about to change?

 

Less than one month in to 2019 and the FCA have provided perhaps the biggest sign that cryptocurrencies are here to stay. A consultation paper from the Crypto Asset Task Force was released last week, which aims to provide guidance on the long-awaited crypto regulation.

 

The announcement comes after the FCA has faced pressure from Parliament in relation to the lack of regulation, despite the FCA's actions and statements throughout 2018 leading most to believe that regulation was around on its way. Indeed in April 2018, RPC wrote of how deregulated cryptocurrencies could soon be a thing of the past.

 

Of course, the FCA can be forgiven for its delay. After all, most people had never heard of cryptocurrencies five years ago, and the regulation of such a complex issue isn’t an easy task to undertake.

 

Indeed the question remains how would regulation work? It is hoped we will have some answers following the consultation paper. The FCA will focus on where cryptocurrencies would be defined as: 

  • Specified Investments under the Regulated Activities Order; or

  • Financial Instruments under MIFID II. 

The paper will also discuss whether cryptocurrencies fall under the Payment Services Regulations or the E-Money Regulations.

 

It is hoped that the final guidance, to be released after the consultation has ended, will allow firms to have a greater understanding as to whether the cryptoassets they are dealing with, fall within the regulatory remit.

 

RPC also understand that Treasury Select Committee will be publishing its own consultation paper in the coming months, which will explore "legislative change to potentially broaden the FCA's regulatory remit to bring in further types of cryptoassets". Once this is released, we will of course review and provide our thoughts.

 

The consultation will remain open until 5 April 2019 and RPC will be awaiting the results with interest.