People should be cautious about putting money into unregulated cryptoassets like bitcoin that have “no intrinsic value” and few protections, Britain’s Financial Conduct Authority said on Wednesday. The FCA was publishing final guidance to help firms in the sector understand if their cryptoasset activities come under existing rules.
“This will allow firms to have a better understanding of whether they need to be authorised and what they need to do to ensure they are compliant,” the watchdog said in a statement. Bitcoin and its peers have no assets or guarantee underpinning them, unlike the dollar or sterling, which are backed by the government that issues them. Regulators in Britain, the European Union and the United States are looking at how they can slot cryptoassets into existing securities, anti-money laundering and consumer protection rules before considering new regulation. Facebook’s plans to launch its Libra digital coin has added urgency to the task.
The FCA’s guidance is a milestone in regulating a sector that remains a tiny part of the broader financial system but attracts strong retail interest in parts. Confirming thinking set out in a consultation paper in January, the FCA said tokens such as bitcoin, litecoin and ether did not come under existing rules and therefore authorisation from the regulator is not needed.
“Consumers should be cautious when investing in such cryptoassets and should ensure they understand and can bear the risks involved with assets that have no intrinsic value,” the FCA said. The FCA said that firms offering so-called security tokens that provide rights and obligations like shares or units in funds, must seek authorisation.