UK Cryptoassets Taskforce Proposes Crypto Regulation Changes

The UK Crypto Taskforce releases a final report, where it outlines a number of proposed changes for cryptocurrency regulation in the country. In the report, the organization differentiates cryptoassets by three key types.

30 October 2018 – The UK Cryptoassets Taskforce published a report on October 29. The report suggests a number of changes for cryptocurrency regulation. It also draws readers’ attention to the concerns regarding the way digital assets are traded and used. 

Taskforce Proposes three types of cryptoassets

The Cryptoassets Taskforce in the UK was established in March, and it is comprising the Bank of England (BOE) and the Financial Conduct Authority (FCA). The organization is responsible for the regulation and support of cryptocurrency technologies. 

As of the moment, there is no broadly agreed definition of crypto assets. Considering the fact that cryptoassets can significantly vary in the rights they assign to their holders, the Taskforce developed a framework that recognizes three types of cryptoassets. 

These include cryptoassets as a means of exchange, cryptoassets as a form of investment, and cryptoassets as a form of capital raising. The agency highlights that cryptoasset deployment can enable more efficient and cheap transactions due to the exclusion of intermediaries in the future. 

When cryptoassets are used as an investment, they can have the potential to broaden an access to new investment opportunities. Nevertheless, in the current market state, such investment can expose consumers to unexpected levels of risks. These risks can include those, associated with the illicit activity, according to the report. 

UK Cryptoassets Organization on ICOs

As for the ICOs, the agency concluded that they have the potential to present a number of opportunities. These comprise the support for innovation and promotion of competition. They can also improve efficiency, address financial gaps and build a new investor and customer base. 

The report also notes that cryptocurrency contracts for difference (CFDs) and futures can cause losses that can be intensified by product fees, such as financing costs and spreads. The lack of transparency in the price establishment of the underlying cryptoasset is also highlighted in the report. The FCA writes:

 “Given concerns identified around consumer protection and market integrity in these markets, the FCA will consult on a prohibition of the sale to retail consumers of all derivatives referencing exchange tokens such as Bitcoin (BTC), including CFDs, futures, options and transferable securities. The proposed prohibition would not cover derivatives referencing cryptoassets that qualify as securities, however, CFDs on securities would remain subject to [the European Security and Market Authority’s] temporary restrictions and any future FCA proposals to implement permanent measures in relation to CFDs.”

Following on this, the FSA does not plan to authorize the listing of transferable securities or a fund that references to exchange tokens. This is unless the regulator will have the proof that the underlying market is transparent and compliant with other regulatory criteria. The agency proposed Financial Promotions rules that apply to regulated firms. 

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