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FCA Consults on Guidance Clarifying When Cryptoassets Should Be Regulated

On January 23, the UK Financial Conduct Authority (FCA) published a consultation paper proposing new guidance further clarifying the circumstances under which cryptoassets are to be regulated.

The guidance is in response to one of the commitments made by the joint Bank of England (BoE), FCA and HM Treasury (HMT) Cryptoassets Taskforce in October 2018 to provide more clarity to firms about the regulation of current cryptoassets (as detailed in the November 2, 2018 edition of the Corporate & Financial Weekly Digest).

The consultation focuses on circumstances where cryptoassets interact with the FCA’s regulatory perimeter. It considers where cryptoassets would constitute specified investments under the Regulated Activities Order (RAO), financial instruments such as transferable securities under the revised Markets in Financial Instruments Directive (MiFID II), or whether they would be subject to the Payment Services Regulations 2017 or the Electronic Money Regulations 2011. It also covers where cryptoassets would not come under the definition of “specified investments” under the RAO.

Additionally, the FCA sets out the wider context to the proposed guidance by explaining the key concepts related to cryptoassets. It also provides an overview of the UK market, its assessment of harm and the action it has taken so far.

The FCA also informs firms that HMT will publish a consultation paper in early 2019 discussing legislative change, which could potentially broaden the ’FCA’s regulatory remit to bring in further types of cryptoassets. Furthermore, it also indicates on its new cryptoassets webpage that it will be issuing the following additional publications during 2019:

  1. consumer research on cryptoassets (early 2019);
  2. a policy statement on cryptoassets in response to the FCA’s consultation on cryptoassets (summer 2019); and
  3. a consultation on potentially banning the sale of derivatives linked to certain cryptoassets to retail customers (2019).

The FCA’s consultation closes on April 5.

The FCA’s consultation paper is available here.

The FCA’s new cryptoassets webpage is available here.

©2019 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
Partner

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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