On April 6, the UK Financial Conduct Authority (FCA) published a statement on the requirement that firms trading in cryptocurrency derivatives may need to be authorized. The statement confirms that performing activities or providing services that amount to regulated activities in relation to derivatives are likely to require FCA authorization when performed in relation to tokens that are issued through an initial coin offering, or cryptocurrencies.
Although cryptocurrencies (and other cryptoassets) are not currently specifically regulated by the FCA, cryptocurrency derivatives may constitute financial instruments within the revised Markets in Financial Instruments Directive (MiFID II). The FCA notes that it does not consider the underlying cryptocurrencies to be currencies or commodities for regulatory purposes under MiFID II.
Failure to obtain the necessary authorization for carrying on regulated activity is a criminal offense in the United Kingdom. The FCA recommends that, if firms are unclear as to whether they require authorization, the general regulatory perimeter guidance in its handbook (PERG) may be helpful and encourages firms to seek expert advice if they have any remaining questions.
The FCA’s statement is available here.
PERG is available here.