UK Financial Conduct Authority Issues Consultation Paper on Security Tokens and Other Crypto-Assets

In an attempt to clarify the crypto question, the UK Financial Conduct Authority (FCA) has issued its “Guidance on Cryptoassets” consultation paper. Widely expected since last October, the paper outlines the UK’s current policy and regulatory approach towards cryptocurrencies.

We’ve talked a lot here on The Tokenist over the changing regulatory landscape in europe regarding cryptocurrencies and digital securities. With Germany likely switching gears in this regard, and the rest of the European Union doing the same, the UK has been uncharacteristically silent on this issue.

Now, with the release of the Uk Financial Conduct Authority’s new consultation paper, we have some finer details on regulations in the UK regarding crypto-assets.

Defining Cryptocurrencies

Cryptocurrencies according to the report fall into either “specific investments,” “financial instruments,” “e-money,” or “payment services.”

In regards to defining cryptocurrencies, the report mentions the following:

• All “security tokens” fall into the definition of a “specific investment” and are well under the FCA’s regulatory scope.
• All “exchange tokens” (like Bitcoin or Ethereum) and “utility tokens” (tokens which grant users access) are NOT considered “specified investments.

This is direct contract to American policy on the issue which has deemed all utility tokens effectively a “myth” and has considered them to be securities.

For help on defining whether or not a crypto-asset is a “specified investment,” the FCA recommends that issuers assess it on a case-by-case basis and legal advice should be sought.

Now the struggle is, however, deciding which tokens are “security tokens” and which are “exchange” and/or “utility” tokens. That is a tough question which will be elaborated on in a follow-up by the FCA. The consultation will remain open until April 5th 2019 with final guidance on the topic expected to come out this summer. The treasury will also be publishing a report on the matter sometime soon.

What do you think of these new guidelines? Are they still not concrete enough? Let us know your thoughts in the comments.

Image courtesy of Financial Conduct Authority.