FCA statement on cryptocurrency derivatives
The FCA has published a statment confirming that, while cryptocurrencies are not currently regulated, provided that they are not part of other regulated products or services and the FCA does not consider them to be currencies or commodities under the MiFID II Directive (2014/65/EU), cryptocurrency derivatives are capable of being financial instruments under the MiFID II Directive.
Therefore, those firms which conduct regulated activities in cryptocurrency derivatives fulfil the two-limbed test for FCA regulation and must comply with relevant provisions in the FCA's Handbook and directly applicable EU regulations. This includes being FCA regulated.
The FCA goes on to explain that it is likely that dealing in, arranging transactions in, advising on or providing other services that amount to regulated activities in relation to derivatives that reference either cryptocurrencies or tokens issued through an initial coin offering (ICO), will require authorisation. They add that this includes:
Cryptocurrency futures - a derivative contract in which each party agrees to exchange cryptocurrency at a future date and at a price agreed by both parties;
Cryptocurrency contracts for differences (CFDs) - a cash-settled derivative contract where the parties seek to secure a profit or avoid a loss by agreeing to exchange the difference in price between the value of the cryptocurrency CFD contract at its outset and at its termination; and
Cryptocurrency options - a contract that grants the beneficiary the right to acquire or dispose of cryptocurrencies.
We have taken great care to ensure the accuracy of this document. However, it is writen in general terms, is for general guidance and does not constitute advice in any form. You are strongly recommended to seek specific advice before taking any action based on the information it contains.
No responsibility can be taken for any loss arising from, action taken or refrained from on the basis of this publication.
Nothing within this document may be copied, re-printed or similar without prior writen permission from Cummings Law Ltd.
Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327
42 Brook Street
London Greater London W1K 5DB
14 12 2018