UK Regulator Says Stablecoins Are EMoney

The Financial Conduct Authority (FCA) has issued updated guidance on the U.K.’s cryptocurrency market.

The Block reported that the comprehensive overview is expected to follow FCA’s draft proposals released at the beginning of the year, which explained that “any token that is not a security token, or an eMoney token is unregulated.” That means that trading cryptos like bitcoin and ether only need to follow KYC rules and will not be under FCA scrutiny.

In addition, utility tokens will not fall under the FCA’s domain in “most circumstances,” while the decision on what should be classified as eMoney will need to be handled on a “case by case” basis. The overview states that “stablecoins, fiat-backed coins, generally seem to be classed as eMoney, depending on their structure. Many will therefore fall under the FCA’s remit.”

Commentators in the UK expressed their support of the new guidance.

“Overall, the changes made provide greater clarity on the areas covered in CryptoUK’s consultation response,” said CryptoUK, a lobbying and advocacy group, adding that it was happy that the FCA had included its recommendation to create a new category for tokens considered eMoney.

And Matthew Pollard, chief financial officer of Archax, an upcoming trading platform for security tokens, said that “the FCA continues to cautiously tackle digital assets. The recent paper is another positive sign that progress is being made and that the FCA has a plan.”

The overview follows the FCA’s announcement earlier this month that it wants to ban retail cryptocurrency sales, explaining that the products are a risk to consumers because cryptos’ value and risks cannot be reliably assessed due to extreme volatility, market abuse and financial crime, among other reasons.

“As with our work on the wider [contract for difference (CFD)] and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets,” said FCA Executive Director of Strategy & Competition Christopher Woolard. “Most consumers cannot reliably value derivatives based on unregulated crypto assets. Prices are extremely volatile, and as we have seen globally, financial crime in crypto asset markets can lead to sudden and unexpected losses. It is, therefore, clear to us that these derivatives and exchange traded notes are unsuitable investments for retail consumers.”