FCA Speech on key issues identified by the Cryptoassets Taskforce

The FCA has published a speech by Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered at the Regulation of Cryptocurrencies event on 20 November 2018.

The speech highlights the key issues identified by the Cryptoassets Taskforce (consisting of the FCA, HM Treasury and the Bank of England) in its report published at the end of  October 2018 and the actions recommended by the FCA to tackle the issues.

Mr Woolard pointed out that it is hard to come by an easy explanation of what is meant by the term ‘cryptoassets’. The FCA’s definition is that it is a cryptographically secured digital representation of value or contractual rights that uses some type of digital ledger technology and can be transferred, stored or traded electronically. Furthermore, the taskforce has categorised cryptoassets into three broad types: exchange tokens, security tokens and utility tokens.

Although there are examples of cryptoassets delivering beneficial innovation in financial services,  Mr Woolard said that the taskforce identified 3 major harms associated with cryptoassets – those to consumers, to market integrity and the risk of financial crime.

The FCA, HM Treasury and the Bank of England are each taking a number of steps over the coming months to address these harms and to encourage future beneficial innovation. In particular, the FCA will consult on perimeter guidance by the end of 2018, in order to help firms better understand the boundaries of current regulation in relation to cryptoassets.

To combat financial crime risks, Mr Woolard said that HM Treasury will undertake one of the most comprehensive responses globally to the use of cryptoassets for illicit activities by applying and going further than the existing directive, the fifth EU Anti-Money Laundering Directive (5AMLD). On this, HM Treasury will first consult and then legislate on how to transpose 5AMLD and broaden the scope of anti-money laundering and counter-terrorism financing regulation further.