The UK Financial Conduct Authority (FCA) has issued an official statement on the requirement for firms offering cryptocurrency derivatives to be authorised.
The regulator said that while it does not regulate cryptocurrencies (provided they are not part of other regulated products or services), cryptocurrency derivatives are capable of being “financial instruments” under the Markets in Financial Instruments Directive II (MIFID II). It emphasized that it does not consider cryptocurrencies to be currencies or commodities for regulatory purposes under MiFID II.
“Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable European Union regulations,” the FCA said.
It said that offering services that amount to regulated activities in relation to derivatives that reference either cryptocurrencies or tokens issued through an initial coin offering (ICO), such as cryptocurrency futures, cryptocurrency contracts for differences (CFDs), and cryptocurrency options, are likely to require its authorization.
In September 2017, the FCA issued a warning against ICOs, stating that “Whether an ICO falls within the FCA’s regulatory boundaries or not can only be decided case by case.” In November, it warned investors against cryptocurrency CFDs, calling them “extremely high-risk, speculative products.” The following month, the regulator published feedback on its discussion paper on distributed ledger technology (DLT).
