Bitcoin and other cryptocurrencies (cryptoassets) have caused regulators many headaches in recent years.
In the latest twist in crypto’s regulation saga, the UK’s financial watchdog has launched a consultation on existing guidance around cryptoassets amid fears that companies could be putting consumers at risk by offering unauthorized services.
The Financial Conduct Authority (FCA), the US equivalent to the Securities and Exchange Commission (SEC), launched its consultation after the UK Cryptoasset Taskforce requested additional guidance and clarity on the current regulatory framework.
As there is uncertainty across jurisdictions, newbie blockchain startups are inevitably faced with legal quandaries – do I need to register my ICO with regulators? Can I sell my token and not be hunted down by the watchdogs?
In a bid to move things along, the FCA has established a framework for categorizing cryptoassets: exchange tokens (Bitcoin, Ethereum, Litecoin and any other cryptocurrencies); security tokens (tokens that amount to a specified investment’ and may provide rights such as ownership, repayment of money, or entitlement to share in future profits); and utility tokens (redeemed for access to a specific product or service that’s typically provided using decentralized ledger technology).
According to Marco Santori, a well-known figure in the cryptocurrency space as president and chief legal officer at Blockchain, the FCA doesn’t have jurisdiction over utility tokens because they don’t adhere to the criteria to be classified as security tokens.
In his Twitter thread, Santori notes that unlike the SEC statutes, the FAC consultation papers are not law, and this highlights how differently each side of the Atlantic approaches regulation.
As CoinDesk’s Noelle Acheson rightly points out, the SEC seems to be looking at the bigger picture, seeking to come up with sector-wide regulation and setting punitive fines – it handed cryptocurrency startup Tomahawk a lifetime ban and a $30,000 fine for using fraudulent marketing strategies to fundraise
Meanwhile, over in Europe, authorities are still trying to figure out how to assess the bigger picture.
The FCA has set a 10-week consultation period to and will publish feedback and the final text of the guidance this Summer.