The FCA publishes proposals to ban sale of crypto-derivatives to retail consumers

The Financial Conduct Authority (“FCA“) has published proposals to ban the sale of derivatives or exchange traded notes (“ETNs“) which reference certain types of cryptoassets (“crypto-derivatives“), to address harm posed to retail consumers. The scope of the ban would extend to the sale, marketing and distribution of all derivatives (ie. options, futures and contracts for difference (“CFDs“)) and ETNs which reference ‘unregulated transferable cryptoassets’ by FCA-regulated firms acting in, or from the, UK to retail consumers (ie. ‘retail clients’ as defined in COBS 3.4). The ban would be implemented through proposed changes to the conduct of business (“COBS“) sourcebook.

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Cryptoassets – what should the second line of defence be focussing on?

First published on Thomson Reuters Regulatory Intelligence on 12 June 2019 (this version includes updates as at 28 June 2019).

In our first article on cryptoassets we discussed considerations for boards and senior management. This second article considers regulatory risks specific to cryptoassets which the second line of defence (i.e. compliance and risk functions) within the three lines of defence (TLOD) model of compliance should consider.

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Crypto asset compliance in an uncertain regulatory environment

First published on Thomson Reuters Regulatory Intelligence on 10 May 2019.

Authors: Clive Cunningham and Wendy Saunders

This is the first in a series of articles looking at crypto-assets (encompassing exchange tokens, security tokens, and utility tokens) through the lens of prevailing regulatory expectations of governance and risk management in the UK. In the absence of a specific regime for crypto assets, the legal and regulatory environment remains uncertain. Some crypto assets fall within the current regulatory regime; others do not. UK policymakers are in the process of clarifying the current perimeter and may expand it in the future.

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MAS CLARIFIES STANCE ON DIGITAL TOKENS

On 1 August 2017, the Monetary Authority of Singapore (MAS) clarified through a media release that an offer or issue of digital tokens would be regulated if these tokens constitute products which are regulated under the Securities and Futures Act (SFA). In doing so, the MAS sent a strong signal that it would focus on the substance of the transaction, even if it is presented within the “cryptocurrency” wrapper.

MAS’ clarification comes in the wake of an increase in the number of initial coin or token offerings (ICOs) in Singapore. In June 2017, it was reported that blockchain startup TenX had raised close to US$80 million from a token sale. A Singapore based startup, Cofound.it, also launched the sale of its own digital currency in May 2017 to fund building of its blockchain-based platform to connect start-ups with investors and experts for funding and advice. Further ICOs are reported to be planned later this year.

This bulletin provides an introduction into ICOs and touches upon some of the market developments and regulatory issues surrounding ICOs and digital tokens. Please click here for more details.