Category Archives: Financial Conduct Authority

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UK OTC Firm Gets Derivatives Go Ahead from Regulator

UK OTC Firm Gets Derivatives Go Ahead from Regulator, CFDs

The UK watchdog, Financial Conduct Authority (FCA) has granted permission for London based firm B2C2 OTC Ltd to deal in cryptocurrency CFDs.

“Contracts for Difference” (CFDs) are designed for traders to predict crypto price fluctuations allowing them to profit from rising or fallings markets. The FCA’s acceptance of the B2C2 OTC Ltd application is seen as unexpected given the stance of the UK regulator last year when it said that it was unlikely to give any credence to CFDs. At the time it stated:

“Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable European Union regulations.”

B2C2 OTC’s CFD product now offers exposure to Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), Litecoin (LTC) and Ripple (XRP), which the company’s founder Max Boonen suggests gives traders opportunities to become involved in the markets without the “risks associated with crypto custody.”

While the FCA has reportedly been considering a more direct role in managing cryptocurrencies and tokens, a new consultation paper released last week has been seen as an attempt to make things clearer for investors and the cryptocurrency community for future regulatory purposes. A statement from the FCA indicated a need to clarify current guidelines and changes in how cryptocurrencies are regulated, suggesting that the paper “will alert market participants to pertinent issues and should help them better understand whether they need to be authorized and what rules or regulations apply to their business.”

 

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UK’s FCA Continues Clampdown on Unauthorized Exchanges

FCA, UK, exchanges

The UK financial regulator, the Financial Conduct Authority (FCA), is continuing its probe into the activities of unauthorized cryptocurrency firms.

According to information received to a freedom of information request by The Sunday Telegraph, the FCA had opened inquiries into as many as 67 cryptocurrency related inquiries since the middle of November. 49 of these inquiries are now closed, with 39 consumer alerts being issued to companies operating without authorization. The other 10 have received warnings.

Currently, 18 cryptocurrency related lines of inquiry are still under review following the FCA’s statement cautioning the public earlier this year that cryptocurrency CFDs such as the popular options offered by eToro, were “extremely high-risk, speculative products”. Companies dealing in cryptocurrency related investments in the UK still require rubber-stamping by the FCA before a license to operate is issued.

The FCA has declined to comment on the investigation into the remaining 18 cases. The UK regulator has already revealed its intention to be tough on the cryptocurrency market since digital money is a part of the financial market and subject to the same level of scrutiny. There is already a discussion on banning specific crypto financial instruments, such as Bitcoin futures.

FCA’s executive director of strategy and competition Christopher Woolard cited “integrity issues” as a reason for also considering placing a ban on cryptocurrency derivatives in an event in London on the 20th of November.

The focus, according to Woolard, would be on what the FCA has called “cryptocurrency contracts-for-difference (CFDs)” which would likely cover “options, futures and transferable securities,” with concerns that “retail consumers are being sold complex, volatile and often leveraged derivatives products based on exchange tokens with underlying market integrity issues”.

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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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Business Authority Slams UK’s Proposed Crypto Regulations

The Financial Conduct Authority (FCA), the government body responsible for regulation of financial services companies in The United Kingdom, has come under fire from the UK business Authority in a new report.

The director of the British Business Federation Authority (BBFA), Patrick Curry, has suggested that MPs’ plans to force the FCA to crack down on illegal activity is unnecessarily punitive and could ultimately damage the UK’s standing as a fintech hub. Curry maintains that it is still far too early to take such an approach given that blockchain is making important inroads towards improving business and the way the way that companies operate:

“It is a very blunt instrument approach and I haven’t seen this in other countries. The use of this technology is still a voyage of discovery and these technologies are being refined for different types of use. My concern is the law of unintended consequences.”

The report’s co-authors, the BBFA, law firm Baker Botts, Novum Insights and crypto exchange TodayQ, argue that “bad regulation is worse than no regulation at all”.

Neil Foster, the corporate technology partner at Baker Botts, said that proposed legislation is too all-embracing and needs far more sophistication, suggesting that crypto assets need their own discrete set of legislative guidelines. He argued:

“With sophisticated classification, we should work out what could be a regulated activity. If you crowbar everything into the Regulated Activities Order you are making everything into an investment bank.”

A recent report published by the United Kingdom Treasury Committee has called for the “Wild West” crypto-asset market to be regulated. Summarily, the report acknowledged that cryptocurrencies and “most” initial coin offerings (ICOs) did not fall within the remit of the FCA who, in August, established an international regulatory network for financial innovations.

The UK’s daily broadsheet, the Telegraph, has reported that the Conservative government is still dragging its heels regarding the regulation of cryptocurrency, despite London becoming one of Europe’s main crypto hubs and the home to some of the industries biggest players.

 

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