- The UK Financial Conduct Authority (FCA) has launched ‘consultation’ on crypto assets
- The consultation aims to help FCA in providing clarity to firms, investors, and consumers who want to invest in the crypto market
- FCA thinks crypto asset tokens fall into authorised areas categories like specified investments
The Financial Conduct Authority or FCA launched the start of a consultation on crypto assets. The consultation period will end on April 5, 2019. This will include a view of a policy statement in the summer and possible legislation to follow. The consultation is intended to help the FCA in providing clarity to firms, investors, and consumers.
Before this move, a report was published in October 2018. This report was created by the cryptoassets taskforce and is made up of the FCA , the Bank of England and HM Treasury. It mentions that crypto assets like bitcoin should come under the scope of the Financial Conduct Authority.
Back in December 2018, HM Treasury published a guide on the tax regime for crypto assets. Here, they made it clear that capital gains tax is still chargeable.
In a statement by the FCA’s executive director of strategy and competition, he commented the following:
“This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t. 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.”
‘Here to stay’
FCA also published a statement along with the announcement. It mentioned that the regulator is at pains to point out the existing unregulated nature of the sector and lack of protections. However, by implication, they still see cryptocurrency as something that is here to stay .
According to the regulator, while the crypto sector is still small, it cannot be denied that there is an increasing number of consumers who are investing in crypto assets. They added:
“While crypto assets have the potential to bring benefits to markets, firms and consumers, there remains considerable risks to markets and consumers.”
Argument on How to Treat Crypto Assets
While there is an ongoing argument on whether crypto assets should be treated as securities like stocks or as ‘utility tokens’ that gives access to certain products, the FCA thinks crypto asset tokens fall into authorised areas. These areas include specified investments under the Regulated Activities Order, e-money under the E-Money Regulations and Payment Services Regulations, and financial instruments under the Markets in Financial Instruments Directive II.
Since there are no regulations in the cryptocurrency sector, those who are holding crypto assets will not be protected by the Financial Ombudsman Service or Financial Services Compensation Scheme.
Due to the lack of regulation in the crypto sphere, there has been an increasing amount of support in the fundraising by crypto startups in 2017. This became possible through the use of initial coin offerings (ICOs). In fact, £4.8 billion was raised globally through ICOs. However, there are many fraud ICOs and many ICO projects have failed.