The Reserve Bank of India (RBI) have made strong movements towards completely banning cryptocurrency in India this week. In a non-related but ever so coincidental move, the UK Financial Conduct Authority (FCA) have today made a stark announcement that suggests that we too, may be heading towards an era of cryptocurrency control and censorship.
The FCA at present have very little authority with regards to cryptocurrencies. In line with the Bank of England and a government cryptocurrency task force, further research is being carried out on what cryptocurrency means for the UK. They claim to be neutral about it, but many people get the feeling that really, the UK isn’t far behind the likes of India, who have now cemented themselves as a nation very much against the cryptocurrency-revolution.
The statement released by the FCA today in an online press release, titled ‘Cryptocurrency Derivatives’ can been viewed in full here- https://www.fca.org.uk/news/statements/cryptocurrency-derivatives
The FCA recognise that at present, they have very little authority over cryptocurrency interactions in the UK:
“We are aware of a growing number of UK firms offering so-called cryptocurrencies and cryptocurrency-related assets. As indicated in our Feedback Statement on DLT, cryptocurrencies are not currently regulated by the FCA provided they are not part of other regulated products or services.”
However, the FCA now recognise that cryptocurrencies are financial assets within a market and therefore any firms or companies using them should be abiding by all regulations in the FCA handbook and other applicable European Union regulations.
Their main focus, is the inception of Initial Coin Offerings (ICO’s) that have sparked an array of controversy of late. The FCA’s stance on this is:
“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 by the FCA. 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 in which the parties to the contract 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
cryptocurrency options – a contract which grants the beneficiary the right to acquire or dispose of cryptocurrencies.”
This suggests that any companies partaking in planned, future cryptocurrency exchanges, cryptocurrency contracts or indeed, flexible cryptocurrency payments should seek approval from the FCA before taking an action. This also includes the inception of and involvement within ICOs.
“It is firms’ responsibility to ensure that they have the appropriate authorisation and permission to carry on regulated activity. If your firm is not authorised by the FCA and is offering products or services requiring authorisation it is a criminal offence. Authorised firms offering these products without the appropriate permission may be subject to enforcement action.”
Whilst this is by no means preventing companies and firms from using cryptocurrency, it resonates as an attempt to reduce a company’s freedom to do so, as under these guidelines the FCA hold the power to ultimately decide who can use cryptocurrencies (as a business). Whilst this is by no means as aggressive as the statement issued by the RBI, it provides an adequate point for comparison in that this seems to be a very big step towards cryptocurrency regulation, masked as but a mere inconvenience for the businesses involved.
What I mean here is that yes, the FCA are only asking firms to run cryptocurrency activities by them but, under this guise, if they really wish to, they can in theory reject every attempt to engage in any cryptocurrency related activities, essentially removing the option to engage in cryptocurrency from the outset. Whether this will be the case or not, I really don’t know.
The FCA highlight that anybody who fails to abide by these terms may be subject to criminal proceedings and enforcement will be carried out.
In the general climate at the moment, this only adds to the gloomy outlook that seems to resonate around the UK at the moment. The FCA could use this as an opportunity to enrich and secure the cryptocurrency industry and maybe, just maybe it will make cryptocurrency a much safer option for firms within the UK. A much more Orwellian outlook however does also seem possible in the wake of this.
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