Earlier today the Financial Services Conduct Authority (the "FCA") published its guidance on crypto assets. This follows on from the consultation paper published by the FCA in January. Important takeaways are as follows:
- Exchange tokens, like Bitcoin, are not regulated (although new anti-money laundering regulations will apply).
- The guidance helpfully defines "Security Tokens" (which are Tokens that behave like share or debt instruments). This is important as Security Tokens are regulated.
- Utility Tokens will not be regulated unless they fall within the definition of electronic money.
- Stablecoins, which are pegged to fiat currencies or other assets, will likely fall within the definition of electronic money.
The guidance reiterates that it will look at cryptocurrency assets on a case by case basis. The guidance helps clarify which crypto assets are regulated. However, the market is still pretty nascent and the lines are frequently blurred. We regularly see security tokens dressed up as utility tokens in an effort to avoid regulation.