Structure of virtual asset regulation

Where multiple jurisdictions are viewing virtual assets differently, there are various institutions within a particular jurisdiction having different views on virtual assets. Breakdown of classification of regulatory authorities that first issued an official statement on crypto assets in their respective jurisdiction:

The government responses across the globe can be broadly bifurcated into following four responses:

1) Applying the existing regulation on crypto assets (eg. Australia’s information sheet on ICO’s and cryptocurrency)

2) Amending the existing law to include crypto assets (Estonia’s amendment of AML laws)

3) Creating a separate legal framework for crypto assets (Malta Virtual Financial asset Act)

4) Creating an entire Regulatory framework for Fintech sector which includes crypto assets

Situation in the United Kingdom

As of now there are No internationally agreed taxonomy or classification for crypto assets. However, in the UK the current crypto asset regulation allow it to fall under any of the following category: e-money tokens, security tokens, unregulated tokens (utility tokens or exchange tokens). Security tokens will fall within the regulatory perimeter under securities; Utility and exchange tokens will be outside the regulatory perimeter unless they constitute e-money or are used to facilitate regular payments. The FCA uses a case-by-case approach to determine if a crypto asset falls under existing regulations.

The UK authorities undertook following activities to support the growing virtual asset industry:

• Minimum policy expectations for stable coins (by BOE and HMT)

• Clarifying the regulatory perimeter (by FCA)

• Implementing the Fifth Anti-Money Laundering Directive (by HMT and FCA)

• Consulting on bringing a broader subset of crypto assets within the FCA financial promotions regime

• Banning the sale, marketing and distribution of derivatives and exchange traded notes that reference certain types of crypto asset to retail consumers (by FCA)

• Support for DLT-based services through the FCA sandbox (by FCA)

Reference:

1. Cambridge Global crypto asset regulatory landscape http://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2019-04-ccaf-global-cryptoasset-regulatory-landscape-study.pdf
2. Government of UK regulatory approach to crypto assets and stable coins https://www.gov.uk/government/consultations/uk-regulatory-approach-to-cryptoassets-and-stablecoins-consultation-and-call-for-evidence