CRYPTOASSETS Flashcards
How to define a cryptoasset
Understood to be a digital representation of a value of contractual rights that can be transferred/stored electronically
the term ‘token’ can be used interchangeably
No agreed taxonomy of cryptoassets currently exists
Could fulfil a diverse set of functions - trading of digital collectibles or raising capital for new projects
2019 the FCA published ‘guidance on cryptoassets’
The FCA 2019 Publication on Cryptoassets
E MONEY TOKENS - Meet the definition of electronic money in the EMRs of 2011 - digital payment instructions that store value and redeemed at par value
SECURITY TOKENS - akin to specified investments like a share or debt instrument. Subject to FCA regulation.
UNREGULATED TOKENS - neither e money tokens or security tokens - unregulated
- UTLITY TOKENS - used to buy a service or access a DLT platform
- EXCHANGE TOKENS - tokens used a means of exchange - such as BITCOIN
‘STABLECOINS’ - a evolution of cryptoassets defined to minimise the volatility in value
Can fall into any of the above depending on its design
FCA Publication on Crypto 2020
Prohibiting the marketing, distribution and sale in or from the UK to retail clients, of derivatives and exchange-traded notes (ETNs) that reference certain types of unregulated transferable cryptoassets.
The Advertising Standards Agency published a webpage for advice on adverts for cryptoassets - what did it outline?
- Regulation of cryptoassets
- those not regulated by the FCA do not fall under FOS and FSCS
- cannot take advantage of investors inexperience
- include all relevant material
- make it clear that values can go down and up
- past performance is not a guide for future performance
HM TREASURY STATEMENT JULY 2020
Published a consultation on cryptoassets
The intention to enhance consumer protection and promote responsible innovation
It identified three areas to be taken
- consumer protection
- financial crime
- market integrity
THE FSB’s paper in February 2022 outlined what?
It focused on three vulnerabilities to three segments of the crypto market
- unbacked cryptoassets (Bitcoin)
- stablecoins
- decentralised finance
They are fast evolving and could pose a threat to financial stability
Can bring about regulatory gaps and arbitrage
What areas did the FSB outline for ongoing vigilance?
- Increasing banking sector involvement in the eco-system, such as balance sheet exposure
- Institutional investors increasing their exposures to cryptoassets relative to the size of their portfolios
- Acceleration in adoption of cryptoassets for payments
- The growth, role and risk associated with cryptotrading platforms. Losses in cryptoassets where accompanies by leverage
- rapid growth in DeFi in the absence of clearly absent intermediaries or parties responsible for governance
- gaps in the risk assessment
FSB will continue to monitor development and risks that cryptoassets pose to the regulatory sphere
Will continue to monitor and share information on regulatory and supervisory approaches to ensure effective implementation of high level recommendations
Who do CRYPTOASSET BUSINESSES NEED TO REGISTER WITH?
THE FCA - who in 2020 became the AML AND TF supervisor in the UK
They need to register with them by ‘way of business’ if they wish to carry out services in the UK
CUSTODIAN WALLET PROVIDERS
A firm that wishes to safeguard and administer cryptoassets on behalf of customers or private cryptographic keys for customers
WHAT ARE CRYPTOASSET EXCHANGE PROVIDERS?
A firm or sole practitioner who does one of the following
- exchanging or making arrangements with a view to the exchange of cryptoassets
- exchanging, or arranging or making arrangements with a view to the exchange of, one cryptoasset for another, or
- operating a machine which utilises automatic processes to exchange cryptoassets for money
FINANCIAL PROMOTIONS FOR CRYPTO ASSETS
From 8 October - firms wishing to promote cryptoassets in the UK to retail consumers must, by law, be authorised or registered by the FCA, or have their marketing approved by an authorised firm
Exclusion from this category is
- NFTS
-Non transferable cryptoassets
E-money and currency issued by a bank
