UK’s FCA takes first step to regulating crypto assets

FCA has published its consultation on crypto assets and is considering a ban on certain crypto asset derivatives being sold to retail investors. 

The UK’s Financial Conduct Authority (FCA) has launched a consultation on crypto assets in a first step towards regulating the market.

A statement on the consultation said that it had been launched in response to an industry request for clarity and guidance on whether crypto asset activities fall under the regulator’s authority, and if certain firms need to be authorised with the FCA to ensure compliance.

The FCA reiterated that despite numbers still being relatively small, an increasing number of consumers are investing in crypto assets, and the consultation is an important first step in addressing the potential harms from crypto assets. 

“This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t,” said Christopher Woolard, executive director of strategy and competition at the FCA. “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.”

Furthermore, the FCA said that later this year it will look into a possible ban on the sale of derivatives linked to certain crypto assets that are being sold to retail investors, and the Government will consider whether to expand the regulatory perimeter to include crypto asset activities. 

In response to the consultation, Ed Gouldstone, head of product management for Linedata’s asset management business, welcomed the FCA’s consultation, describing it as the first step towards a fully functioning marketplace for institutional-grade crypto investing.

“Crypto investing is still in its infancy in the asset management industry, with most established players reluctant to enter the area without the regulatory framework that governs traditional markets and more mature asset classes,” Goldstone added. 

“For fund managers to launch crypto funds they’ll also need high quality support services, such as custody and fund administration, and the market infrastructure to facilitate institutional levels of trading volumes. By defining the parameters of its jurisdiction on crypto activities, the FCA is kick-starting a process which should give financial companies the confidence they need to develop innovative crypto asset strategies.”

The FCA is seeking comment on its consultation by 5 April, after which it will provide its final guidance on the issue.