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UK’s FCA Discusses Derivatives Ban Despite 3 Million Crypto Users

The UK’s financial regulator, the Financial Conduct Authority (FCA), has cited “integrity issues” as a reason for considering placing a ban on cryptocurrency derivatives in an event in London of 20 November.

The comments were made by the FCA’s executive director of strategy and competition Christopher Woolard, addressing invited guests at the Regulation of Cryptocurrencies event in the capital.

The UK government’s Cryptoassets Task Force met for the first time on 21 May as part of the country’s plan to regulate the cryptocurrency and blockchain space and since then has been reporting back its findings regarding the regulation of cryptocurrency in the UK.

One of the functions of the task force is to examine the risks of blockchain technology and mitigate these while examining the benefits of ledger technology in financial services. The Cryptoassets Task Force comprises representatives from the UK Treasury and the Financial Conduct Authority (FCA).

The idea of a ban is a recent development only surfacing last month for the first time, among criticism that the UK had been slow in addressing the growth of cryptocurrency adoption in the UK without adequate safeguards and guiding legislation for the industry.

The focus, according to Woolard, would be on what the FCA has called “cryptocurrency contracts-for-difference (CFDs)” which would be likely to cover “options, futures and transferable securities”. He mentioned in his speech that UK’s regulators were particularly concerned “…that retail consumers are being sold complex, volatile and often leveraged derivatives products based on exchange tokens with underlying market integrity issues”.

In their findings, the task force had categorized CFD’s into three types, Woolard noted, constituting “exchange tokens” such as Bitcoin (BTC), security tokens and utility tokens. He also noted that in case of unauthorized use of tokens, the FCA could initiate what he termed as “one of the most comprehensive responses globally to the use of crypto assets for illicit activities”.

Despite the FCA’s comments regarding the future of derivatives at the event, many surveys continue to illustrate Britons’ growing awareness and use of cryptocurrencies with 15.8 million UK residents owning or considering Bitcoin. A July study revealed up to 3 million people have invested in Bitcoin in the country through online trading platforms.

The technology behind cryptocurrencies is burgeoning in the UK. The country is known as a driving force in blockchain research and the spread of solutions is being utilized by numerous companies, as the country becomes one of the world’s most significant and dynamic fintech hubs.

 

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Winklevoss Twins and Gemini Glimpse Crypto Horizon in UK

Gemini and the Winklevoss twins are looking ahead to the UK as their next lucrative cryptocurrency landscape.

The entrepreneurial crypto brothers, having recently been knocked back by the SEC after their own ETF submission was turned down, have at least have received some recent success in getting a rubber stamp from the NY regulators for the company’s new stablecoin. Two firms, Gemini Trust Company, and the Paxos Trust Company are the first stablecoin providers to receive the go-ahead to list on exchanges in New York State.

Now it appears that the brothers are “crossing the pond” with their latest venture. Those close to the company have reported that Gemini has already taken the step to hire consultants to advise on an approach to move into the UK. London is currently the European financial epicenter, although many companies are now awaiting the final outcome of Brexit talks, and some have even already moved from London to Germany and France in anticipation of a negative result in which no deal between the UK and Brussels is reached.

This has clearly done little to dissuade Gemini as it plans to file an application with the UK’s equivalent of the SEC, the Financial Conduct Authority (FCA), according to the Financial Times.

If a move does materialize, Gemini’s made competitor will become San Francisco-based exchange giant Coinbase who are now well established in the UK as the main provider of crypto-related services to UK residents. Coinbase has recently expanded the offerings on its UK platform, enabling easier withdrawals from UK Coinbase sterling accounts to English banks and forming a partnership with major English bank, Barclays, to simplify its platform for users.

The UK market is still being monitored by the FCA but there have been recent calls for tighter regulatory measures called for by MPs. The FCA has recently asserted that it would not “rule out roles for crypto-assets themselves”, an approach far from calling for a ban or restriction on trading operations. However, the situation is ongoing without any real decisions taken as yet by the Crypto-Assets Task Force set up earlier this year in May.

The most recent noises out of Westminster concerning cryptocurrencies is that MPs want the FCA to look at digital currencies “as a matter of urgency”, suggesting that no new asset class is structured around the technology but that EU AML laws are enforced along with KYC checks.

The Gemini move may offer challenges in a vibrant and lucrative UK market, but the benefits may be worth the risks. The UK experiment has certainly worked for Coinbase who now plan to move into Ireland. Gemini is currently 61st in global rankings.

 

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UK Treasury Seeks Regulatory Scope for “Wild West” Crypto Markets

A report published by the United Kingdom Treasury Committee has called for the “Wild West” crypto-asset market to be regulated.

Positive outlook

The committee, which is comprised of Members of Parliament (MPs), has begun to push lawmakers to begin addressing the numerous risks that it has identified in its report on crypto-assets, published on 19 September.

Summarily, the report acknowledges that cryptocurrencies and “most” initial coin offerings (ICOs) do not fall within the remit of the UK’s financial watchdog the Financial Conduct Authority (FCA) who, in August, established an international regulatory network for financial innovations.

Having assessed the benefits, limitations and risks posed by digital currencies, as well as the present regulatory landscape with special consideration to the voluntary self-regulating bodies within the crypto-asset industry, the Treasury Committee said:

“As the Government and regulators decide whether the current Wild West situation is allowed to continue, or whether they are going to introduce regulation, consumers remain unprotected. The Committee strongly believes that regulation should be introduced. At a minimum, regulation should address consumer protection and Anti-Money Laundering (AML).”

The committee wishes to see the FCA have more legal powers in this area, enabling it to “execute its duties of protecting consumers and maintaining market integrity”.

Additionally, the report mentions that cryptocurrency exchanges are not currently included in AML regulations; this a factor that it believes contributes to the use of cryptocurrencies for illicit activities.

In discussion

It was recently reported that FCA chief Andrew Bailey was in favor of a “balanced approach” to the cryptocurrency industry, claiming that the FCA was eager to explore blockchain technologies.

With regards to the UK blockchain industry, Lord Bates, Minister of State at the Department for International Development, recently said that the government had not yet formally assessed the implications of the present bear market on domestic blockchain enterprise.

This came in response to a colleague who questioned whether or not such an assessment had been made during a parliamentary meeting.

The Treasury Report reflects these concerns with its remarks on market volatility, highlighting the 2017 market highs compared to the present lows, writing, “Investors are exposed to large potential gains, but correspondingly a greater risk of loss. Accordingly, investors should be prepared to lose all their money.”

Regulation race

The Treasury Committee reports that “the introduction of regulation should be treated as a matter of urgency” in order to protect consumers and investors from “growing risks”. ICOs are high on the list of priorities also, as the FCA can do little to protect individuals from financial losses.

Furthermore, at an industrial level, the report acknowledges that supply chain management and financial services had been implementing blockchain into their systems, although this should be pursued as  a joint effort between government and industry to “identify what problems exist and consider whether blockchain offers the most appropriate solution”.

Among many other facets of the industry developments and international regulation efforts, the report is positive that should the UK create a “proportionate regulatory environment” for cryptocurrencies and all related blockchain technologies, it will continue to be a potential global hub for the industry.

 

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UK Government Questioned on Protection of Domestic Blockchain Industry in Bear Market

A question was posed to Lord Bates in parliament Monday regarding the UK’s ability to support the domestic blockchain industry in the current bear market that Bitcoin and other cryptocurrencies are facing.

Lord Taylor of Warwick asked his colleague: “Her Majesty’s Government, what assessment have they made of reports that the value of crypto-currencies in the United States is falling, and of the potential effects that such a decline might have on the UK blockchain industry?”

Lord Bates, Minister of State at the Department for International Development responded, saying that as of yet the government has not made a formal assessment of the implication that the current market performance might bring. He added, ”However, the Government continues to monitor developments in the cryptocurrency market.”

The Cryptoassets Taskforce was pointed to by Lord Bates as evidence that the government is taking the potential risks of cryptocurrencies seriously. The taskforce comprises of members from HM Treasury, the Bank of England, the Financial Conduct Authority (FCA) and members of parliament, and maintains responsibility for determining any issues that the blockchain industry might face.

A report from the Cryptoassests Taskforce is due this Autumn, and Lord Bates’s pressing question will hopefully be answered within the publishment.

A ‘balanced approach’

Last week, Bitcoin News reported that the UK’s FCA chief Andrew Bailey wants the nation to take a ”balanced approach” to the cryptocurrency industry. In a speech in London, Bailey said that the FCA is keen to explore the potentials of the underlying technology of cryptocurrency, blockchain. He told the crowd, “The FCA is firmly a supporter of innovation.”

With the UK’s largest financial regulator onside, this is promising that the UK’s growing blockchain industry will get official support, despite the poor performance of the market this year.

 

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UK Financial Regulator Wants Balanced Crypto Approach

The chief executive of the UK’s Financial Conduct Authority (FCA) addressed the issue of cryptocurrencies at a speech in London on Tuesday, a subject with which he said requires a balanced approach.

Speaking at the 2018 regulator’s Annual Public Meeting, Andrew Bailey initially brought up crypto assets as one of four operational risks significant in the regulators’ current work. While he said that the FCA was ”keen to see the potential of their underlying technology,” he recognized that there are also evident risks, citing a lack of education from consumers who do not understand the price volatility of their investments.

Bailey added that the FCA would not ”rule out roles for cryptoassets themselves”, an approach far from calling for a ban or restriction on trading operations. Combined with his statement that ”the FCA is firmly a supporter of innovation,” UK investors can rest assured that the FCA is not looking to impose any radical changes to the current regulations any time soon.

The section of Bailey’s speech referring to cryptocurrency came to an end with his assurance that the regulatory body was working closely with the Treasury and Bank of England to address any related issues and find ”appropriate responses”, a reference to the Cryptoassets Task Force set up earlier this year in May.

The UK task force held its first meeting on 21 May to discuss the future of blockchain and cryptocurrencies, and to establish ways to mitigate any risks that the growing industry might bring.

Alongside the FCO, the task force includes several senior government officials, the Bank of England and HM Treasury, although they have said they welcome the opinions and input of trade bodies, consumer groups, and investors in order to gain a broader perspective.

The UK has already begun establishing itself as a leading country in the blockchain industry; the outcome of these discussions are crucial in deciding whether this can remain the case in the future.

 

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New EU ICO Rules May Fall Under Crowdfunding Umbrella

The European Parliament in Brussels has taken a further step towards clarifying rules for ICOs within the nations of the European Community.

The all-party group met yesterday to examine proposals for the launching of ICOs although as yet no formal statements of intent have been made regarding the outcome of the meeting. Nicolas Brien of France Digitale did urge for haste, however, arguing that “the market wants legitimization… from every jurisdiction. In the UK it’s particularly bad, none of the banks will bank you if you have crypto”.

Two weeks ago, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report that offers insights into new regulatory frameworks for crowdfunding. ICOs received a notable mention in the report stating, “It takes a much-needed step towards imposing standards and protections in place for what is an excellent funding stream for tech start.”

Brien went on to explain:

“Having the certainty, but also having that legitimization, I actually welcome having a European-wide proposal because it gives people the certainty to know. I think we need to be clear whether this is a utility token or a transferable security, or how the regulator regime looks at that, but I think this can be done because an ICO is another form of crowdfunding. It’s different, but it is a form of crowdfunding.”

As is so often the case at such meeting many regulators got on to discussing the need to prevent potential fraud and scams requiring a higher level of scrutiny than is currently the case. Laura Royle of the Financial Conduct Authority (FCA) echoed those thoughts at the meeting commenting:

“…we certainly do see a huge potential benefit in this space for firms to raise capital from a broad array of investors and without the cost of an intermediary, but there are risks associated [such as] the potential for fraud, with a lack of transparency and the volatility.”

There are current EU estimates that as many as 81% of ICOs could result in fraud. However, if new regulations result in a higher standard than is currently evident, then this may set the example for productive projects in the future within the EU. How this will apply to ICOs within the UK is still uncertain, given the country’s departure from the EU in March of 2019.

 

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Wirex Next to Get FCA’s e-Money License

The UK’s financial regulator, the Financial Conduct Authority (FCA), has just awarded its third e-money license to date.

This time, the beneficiary was crypto company Wirex, who produces prepaid debit cards for converting crypto to fiat, hot on the heels of Coinbase who received its license in March.

We are more than proud to announce that Wirex Limited is only the third #crypto-friendly company in the world to have been granted an FCA e-money licence ✅✅
What does this mean for us? And more importantly, for you? https://t.co/NC2VivcG93

— Wirex (@wirexapp) August 23, 2018

The Coinbase thumbs up from the FCA, unlike the Wirex license, doesn’t relate to cryptocurrency dealings. This enables the crypto company’s access to the UK’s faster payment system for supporting pound sterling, although this is still not available for most users who still can only transfer funds to UK Banks from Coinbase using euros, thus incurring an extra transaction fee.

However, many potential clients are dissuaded from signing up to platforms such as Coinbase due to lengthy verification processes, sometimes waiting many weeks before a user’s bank can be verified and linked for payments.

The FCA’s UK fintech sandbox was established along with the licensing program earlier in the year and then updated later to include two British crypto companies, Globacap and BlockEx, who are currently developing their blockchain applications for financial services.

Although the watchdog is proactive in giving new UK crypto companies opportunities to develop and operate within the UK and globally, with 40$ of latest sandbox companies being blockchain-related, warnings are still being issued to the public regarding crypto scams.

Also, the regulator has accepted a small number of crypto-assets related firms as the FCA suggested that it is “keen to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks”.

A warning was issued last week by the FCA regarding fraudsters, many of which have targeted known figures such as Amstrad Boss and Apprentice host Sir Allen Sugar and other UK media personalities.

Efforts made by the British financial watchdog and its collaborations with government branches indicate that the United Kingdom is to become a significant player in the global movement to create industry regulation frameworks and business innovations.

 

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UK FCA Remains Blockchain Bullish with Establishment of International Regulatory Network

The Financial Conduct Authority (FCA) of the United Kingdom has announced the establishment of a collaborative entity, the Global Financial Innovation Network (GFIN).

Regulatory network

The newly-formed GFIN is a result of the FCA’s ongoing effort to create a global sandbox, a proposal that was announced in February. Currently, 11 collaborators are involved in the GFIN, comprised of international financial regulators and organizations such as the United States Bureau of Consumer Financial Protection, Ontario Securities Commission and the Monetary Authority of Singapore.

As written in the press release, the purpose of the network is to generate a reinvigorated concept of the ‘sandbox’, opening up an unprecedented global knowledge-sharing sandbox.

Christopher Woolard, FCA Executive Director of Strategy and Competition said, “The establishment of the GFIN can help share the experiences and knowledge from across different markets, while also providing a platform for innovative firms wishing to scale their propositions via testing in multiple countries.”

Feedback

Prior to the project update, the FCA had received 50 responses to the February paper that were on board for a collaborative regulatory effort. There were four key themes gleaned from the feedback, providing some precedent for how the GFIN should proceed.

Firstly, respondents were in favor of a regulatory safe-zone where regulators could work together to overcome common challenges, as well as addressing varying policy queries across multiple jurisdictions. This is accompanied by a new sense of efficiency, allowing for ideas to hit new international markets in a speedier fashion.

Furthermore, the feedback indicated that it was important for the new alliance to be transparent and fair, providing an equal field for those who desire to conduct cross-border tests.

Finally, disruptive new technologies with cross-border application are going pose challenges, technologies such as Artificial Intelligence (AI) and Distributed Ledger technology (DLT) aka blockchain, will come under the watchful eye of the GFIN.

To nurture these technologies, the alliance is to improve regulations of securities and initial coin offerings (ICOs) as well as address concerns with know your customer (KYC) and data protection, among others.

Primary objectives

In addition to the guidance offered by the feedback, the GFIN has set out three primary functions. To act as a network of regulators that shares innovation knowledge and experiences, establish an open and constant dialogue for joint policy work, and create an environment for firms to pilot cross-border solutions.

The United Kingdom has been somewhat a pioneer in the blockchain regulation space, with the Bank of England making significant strides having recently completed a DLT Proof-of-Concept. The UK is being touted as a nation with the capacity to lead the blockchain industry, which was a conclusion of a 960-page analysis from DAG Global, Deep Knowledge Analytics and the Big Innovation Center.

 

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40% of UK’s Latest Regulatory Sandbox Companies Blockchain, Crypto Related

Out of the 29 firms released by the UK Financial Conduct Authority (FCA) this week to the fourth cohort of the regulatory sandbox, ten are blockchain and crypto asset firms, according to the EconoTimes.

The FCA’s regulatory sandbox was created so that prospective companies would be able to test innovations and services in a live, protected, business market. The current round is the fourth since the project was announced in 2016.

As this latest round illustrates, 40% of the fourth round companies accepted are distributed ledger technology (DLT) or blockchain-based startups. Also, the regulator has accepted a small number of crypto-assets related firms as the FCA suggested that they are “keen to explore whether, in a controlled environment, consumer benefits can be delivered while effectively managing the associated risks.”

Christopher Woolward, executive director of Strategy and Competition at the FCA, explained further why it saw fit to include crypto-assets firms in this year’s fourth round:

“…we can see significant use of distributed ledger technology (DLT), some experimentation with crypto assets which will help inform our policy work and propositions aimed at helping lower-income consumers.”

The DLT and crypto assets-focused startups selected for the fourth cohort include BlockEX, Capexmove, Etherisc, Fineqia, Fractal, Globacap, Natwest, Token Market, Tokencard, Universal Tokens, World Reserve Trust, 20|30.

Due to the enormous growth in interest in new crypto assets like Bitcoin, the UK government created a Cryptoassets Taskforce earlier this year, consisting of the Treasury, Bank of England and Financial Conduct Authority.

The FCA does not regulate cryptocurrency exchanges, brokers or businesses, which gives them a gray area status and some freedoms. However, it has been pushed by the British Cryptocurrency Trade Association, the UK’s first self-regulatory blockchain industry trade body, to begin regulating the industry.

The United Kingdom was ranked fourth out of 48 other “crypto-friendly” nations, according to a study made by Blockshow Europe this year in which the UK had been praised for its “importance as a European hub for cryptocurrencies”.

 

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UK ‘Cryptoassets Task Force’ Begins on Positive Note

The UK government’s ‘Cryptoassets Task Force’ met for the first time on 21 May as part of the country’s plan to regulate the cryptocurrency and blockchain space, reported Crowdfund Insider.

One of the functions of the UK government’s task force will be to examine the risks of blockchain technology and mitigate these while examining the benefits of ledger technology in financial services. The Cryptoassets Task Force, consisting of the UK Treasury and the Financial Conduct Authority (FCA) has been set up for this purpose and is expected to report back in the summer with its findings in a roundtable scheduled for July, according to Bitcoin News.

The previously announced group involves the participation of the FCA, Bank of England (BoE), HM Treasury and other senior government officials. Some of the named participants include Katharine Braddick, director general of financial services at HM Treasury, Andrew Bailey, chief executive of the FCA, and Dave Ramsden, deputy governor of the BoE.

Bailey commented on the cryptocurrency status quo in the country saying that he was looking forward to working with both the BoE and the UK Treasury in order to develop policy.

Ramsden started on a positive note focussing on the what he saw as the potential benefits to the financial system on the UK economy:

“This task force will enable us to work closely with the Treasury and the FCA to explore how the opportunities posed by these technologies can be realized, while also tackling the risks arising from crypto assets.”

The task force’s analysis will not be limited to the central bank and regulatory bodies, but will welcome contributions from trade bodies, consumer groups and investors, in order to obtain a broad view of opinion from both government and public institutions.

The UK is known as a driving force in blockchain research and the spread of solutions is being utilized by numerous companies, as the country becomes one of the world’s most significant and dynamic fintech hubs. The government is keen to see further development of non-traditional innovation in the light of this recent progress.

BoE governor Mark Carney has moved over time from a position of claiming that cryptocurrency had “pretty much failed” as a form of money, to recent indications that he was not against innovation provided by cryptocurrencies, stating that regulation could potentially “serve the public better”.

British Conservative Member of Parliament (MP) Matt Hancock delivered a speech to the Law Society last month commenting that blockchain technology would have a “monumental impact” on people’s lives in the future.

 

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