The guidance, once finalised, will help businesses understand whether their cryptoasset activities fall under FCA regulation. Businesses will have a better understanding of whether they need to be authorised and can ensure they are compliant and have appropriate safeguards in place.

The consultation, CP19/3: Guidance on Cryptoassets, is in response to industry request for greater clarity, and to the Cryptoasset Taskforce’s recommendation that the FCA provides additional guidance on the existing regulatory perimeter.

Christopher Woolard, executive director of strategy and competition at the FCA, said: 'This is a small but growing market and we want both industry and consumers to be clear what is regulated, and what isn’t. This is vital if consumers are to know what protections they’ll benefit from and in ensuring we have a market functioning as it should.'

This guidance sets out where tokens are likely to be:

• Specified Investments under the Regulated Activities Order;
• Financial Instruments under the Markets in Financial Instruments Directive II;
• E-Money under the E-Money Regulations; or
• captured under the Payment Services Regulations.

Later this year the FCA will consult on banning the sale of derivatives linked to certain types of cryptoassets to retail investors. The government is also planning to consult on whether to expand the regulatory perimeter to include further cryptoassets activities.

The deadline for comments is Friday 5 April.

CP19/3: Guidance on Cryptoassets is here. 

Report by Amy Austin