The British Financial Conduct Authority, FCA, has issued a rather strict warning in a guideline released Wednesday 31st July that cryptocurrencies like Bitcoin, Ethereum and Ripple are unregulated assets. It has also alerted investors of the risks involved in purchasing these assets.
The guideline clearly states its purpose of educating or informing market participants operating in the cryptocurrency space to understand if their activities fall within the scope of FCA’s “regulatory remit” and for which they require FCA’s authorization.
As contained in the introductory report,
“The FCA is, therefore, publishing the Final Guidance as consulted on with some amendments to provide greater clarity on what is and isn’t regulated. This includes making the important distinction as to which crypto assets fall inside the regulatory perimeter clearer.”
The guidance report maintains that decentralized crypto assets including BTC, ETH, and XRP lack regulatory protection and do not feature in the Financial Services Scheme. Investors dealing in this class of investments are not eligible for help from the Financial Ombudsman Service.
According to Christopher Woolard, executive director of Strategy and Competition at the FCA,
‘This is a small, complex and evolving market covering a broad range of activities. Today’s guidance will help clarify which crypto asset activities fall inside our regulatory perimeter.’
Cryptocurrency regulation has gained renewed vigor as a topic of interest since June when Facebook announced its plans of introducing Libra, a global cryptocurrency designed to make cross border settlements. Libra recently acknowledged the uncertainty of its future in a report submitted to the SEC owing to the uncertainty of regulations around digital currencies.
At a global level, cryptocurrencies are largely unregulated and have been known to exhibit extreme volatility. They also come under fire every now and then owing to their alleged involvement in terror financing and illegal trade. FCA’s attempt at creating a distinction between regulated and unregulated crypto assets may help pave the way for promoting the growth of regulated crypto assets and provide a model of cryptocurrency regulation for other nations that are still grappling with the question of whether to ban or to embrace cryptocurrencies.