The Financial Conduct Authority (FCA) has released a consultation paper to set out the cryptoasset activities it regulates.
The guidance aims to provide regulatory clarity for market participants carrying on activities in this space and aims to help market participants to understand whether the cryptoassets they employ are within the regulatory perimeter.
FCA said: “This will alert market participants to pertinent issues and should help them better understand whether they need to be authorised and what rules or regulations apply to their business.”
For custody services specifically, FCA said: “The provision of custody services in relation to securities may be a regulated activity, and firms must make sure they have the relevant permissions like safeguarding and administering investments.”
In October last year, the UK Cryptoassets Taskforce published a report that set out the UK’s policy and regulatory approach to crypto assets and distributed ledger technology (DLT).
It assessed the risks and potential benefits of cryptoassets, identified potential harms, set out a plan for regulation in the UK and detailed the different activities that should be assessed for regulation.
The Taskforce found that while activity in the UK has grown in recent years, the number of firms carrying out crypto asset activities in the UK remains small and the overall size of the UK market represents a small percentage of the overall global cryptoasset market.
Ed Gouldstone, head of product management for Linedata’s asset management business, commented: “The FCA’s consultation on the extent to which cryptoassets fall under its remit is the first step towards a fully functioning marketplace for institutional-grade crypto investing.”
He added: “The consultation is welcome news which we hope will give companies the clarity they need to begin properly exploring and developing cryptoasset products and solutions.”
“For fund managers to launch crypto funds they’ll also need high-quality support services, such as custody and fund administration, and the market infrastructure to facilitate institutional levels of trading volumes.”
“By defining the parameters of its jurisdiction on crypto activities, the FCA is kick-starting a process which should give financial companies the confidence they need to develop innovative cryptoasset strategies.”
