While there are currently no regulations for cryptocurrencies in the UK, the Financial Conduct Authority (FCA) has clearly stated that any firms looking to offer futures, contracts for differences, and cryptocurrency options must adhere to existing regulations. Cryptocurrency derivatives are capable of being financial instruments under the Markets in Financial Instruments Directive II (MiFID II), although cryptocurrencies themselves are not considered to be currencies or commodities for regulatory purposes under MiFID II. Firms conducting regulated activities in cryptocurrency derivatives must comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable EU regulations.

It is likely that dealing in, arranging transactions in, advising on, or providing other services that amount to regulated activities in relation to derivatives that reference either cryptocurrencies or tokens issued through an initial coin offering, will require FCA authorization.

In its consumer warning on ICOs, the FCA indicates that an ICO may or may not fall within their regulatory perimeter depending on the nature of the tokens issued. This can only be decided on a case by case basis. Therefore, it may be best to consult an attorney when deciding whether or not an ICO might fall under the FCA’s regulatory perimeter.

Most recently, Mark Carney (governor of the Bank of England) has warned that cryptocurrencies may face a regulatory crackdown. He said that the time has come to “regulate elements of the crypto-asset ecosystem to combat illicit activities.” Although nothing has been released yet, the Bank has hinted at greater controls to come in the future.

Sources:

• FCA: Cryptocurrency Derivatives
• CoinTelegraph: How British Financial Regulator Creates A Foundation For UK Cryptocurrency Adoption
• FCA Handbook
• FCA: Initial Coin Offerings
• FCA: Consumer Warning About the Risks of Investing in Cryptocurrency CFDs
• CoinTelegraph: UK’s Financial Regulator Releases Guidelines For Dealing In Crypto Derivatives
• The Guardian: Bitcoin Faces Regulatory Crackdown, Bank of England Warns