The FCA recognised in 2018 that there was an increased, significant and growing attraction from customers to the digital asset market – Crypto Currencies.
In October 2018, the UK Cryptoassets Taskforce published its first set of UK policies and regulatory approach to CrytoAssets and Distriputed Ledger Technology (DLT)
It recognised that mainstream financial institutes are entering the market. It is of importance to the taskforce that the activity, even unregulated should provide clarity of the firms use of the asset to ensure its captured in future regulation.
The task force main aim is too ensure that the financial markets work to protect customers from harm and maintain the integrity of the UK financial system. As the FCA is a technology neutral regulatory it does not make judgements on the use of the technology but rather the application and parameters it is operated.
The Key concepts relating to the categorisation of the cryptoassets can be defined as Exchange tokens, Security Tokens and Utility Tokens and are operated under a Distributed Ledger.
These three assets are defined by the FCA as
* Exchange tokens: these are not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They are, usually, a decentralised tool for buying and selling goods and services without traditional intermediaries. These tokens are usually outside the perimeter.
• Security tokens: these are tokens with specific characteristics that mean they meet the definition of a Specified Investment like a share or a debt instrument (described in more detail in Chapter 3) as set out in the RAO, and are within the perimeter.
• Utility tokens: these tokens grant holders access to a current or prospective product or service but do not grant holders rights that are the same as those granted by Specified Investments. Although utility tokens are not Specified Investments, they might meet the definition of e-money in certain circumstances (as could other tokens), in which case activities in relation to them may be within the perimeter
A guide to show whether an asset needs to be regulated can be found below.