The regulatory framework for Bitcoin and other digital assets continues to evolve globally, albeit slowly.
The U.K. financial services regulator, the Financial Conduct Authority, finalized its guidance on crypto assets in July, clarifying which tokens fall under its jurisdiction.
The recent announcement from the FCA classifies cryptocurrencies such as Bitcoin and Ethereum as “exchange tokens.” They are not regulated, although anti-money-laundering rules still apply.
The FCA has proposed banning the sale of crypto-derivatives to retail consumers and is proposing rules to address the sale of derivatives and crypto exchange-traded notes.
Three Expert Takes
Aries Wang, CEO and co-founder of Bibox, a digital asset exchange, said in a statement: "The FCA is by no means driving regulatory change but as an influential force in the European market, we foresee the typology and guidance being rolled out as an industry standard. The paper critiques a supposed inherent intention to remove token holder rights in the case of what the FCA categorizes as 'exchange tokens,' the umbrella term for cryptocurrencies, crypto coins and payment tokens."
Charles Phan, the founding engineer of Interdax, a cryptocurrency exchange, said: "Given how the FCA has listened to the industry about which tokens to regulate, actively seeking industry feedback, it is unfortunate they have taken a blanket approach regarding crypto derivatives.”
Crypto derivatives are a “field ripe with innovations benefiting the retail investor,” and it would be unfortunate for U.K. firms to be excluded due to events experienced in the regulated financial world, he said.
“While the guidance seems sensible and aligned with the approach taken in several other countries, their proposed ban of derivatives built on top of the 'exchange tokens' seems excessive, ill-suited and could simply push innovation overseas," he said.
"These products will continue to thrive in the coming years to potentially become the most valuable niche of the crypto ecosystem, replicating what happened in the traditional markets. If the FCA is too stringent on in-demand crypto assets, it risks further isolating itself from a rapidly growing and highly fruitful market."
Iain Wilson, advisor to NEM Ventures, the venture capital and investments arm of the NEM blockchain ecosystem, said in a statement: “Repositioning the token taxonomy to distinguish security tokens from e-money tokens is positive; regulation for securities should be structured differently from payments," he said.
"The overall guidance provides a framework for distinguishing between regulated and unregulated tokens, as well as detailing the firm and individual activities that fall within the scope of FCA authorization. Whilst some survey respondents continue to look for global regulatory harmonization, we feel that this is unlikely in the foreseeable future."
Facebook, Walmart Jump On Digital Asset Bandwagon
In the U.S., Facebook, Inc. FB and Walmart Inc WMT have both made an extremely bold move into the cryptocurrency space with the planned launch of digital coins.
This has drawn interest from regulatory authorities in the U.S.
In July, Facebook faced scrutiny in a Senate hearing over its plans for the Libra cryptocurrency.
In contrast, the reaction to the Walmart Coin has been more agreeable.
Bloomberg reports that Cowen analyst Jaret Seiberg has said that Walmart’s proposed digital coin should not face as much regulatory pushback as Facebook’s proposed virtual currency.
Libra and Walmart’s crypto proposal differ in scale, the analyst said: Facebook has global intentions that do not appear to be shared by Walmart.
CoinCorner CEO Danny Scott said Walmart has filed a patent for a U.S. dollar-pegged stablecoin.
“While the publicity is obviously good news for the crypto industry, we believe it is a waste of time and resources for these companies — something that will eventually show as time passes. There are already a number of decent stablecoins out there, all doing exactly the same job,” he said.
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