FCA – Offering Crypto. Derivatives Without Auth. Is A Criminal Offense

The UK’s securities watchdog FCA (Financial Conduct Authority) has issued a statement requiring all entities offering cryptocurrencies in any form (CFDs, options, and other kinds of derivatives) to be authorized by the regulator. The FCA, however, reaffirmed its stance that it does not consider cryptos as currencies or commodities to be regulated under Markets in Financial Instruments Directive II (MIFID II).

The FCA has stated that it does not regulate cryptocurrencies unless the product offered by an entity is a part of any other regulated products or services. At the same time, FCA believes that cryptocurrency derivatives are capable of being financial instruments under MIFID II.

Therefore, entities should receive an authorization from FCA before offering prospective customers with derivative products tied to cryptocurrencies.
This includes:
• cryptocurrency futures – a derivative contract in which each party agrees to exchange cryptocurrency at a future date and at a price agreed by both parties
• cryptocurrency contracts for differences (CFDs) – a cash-settled derivative contract in which the parties to the contract seek to secure a profit or avoid a loss by agreeing to exchange the difference in price between the value of the cryptocurrency CFD contract at its outset and at its termination
• cryptocurrency options – a contract which grants the beneficiary the right to acquire or dispose of cryptocurrencies

FCA has also warned that it is a criminal offence to offer such products without an authorization and any entity offering such a product will be subject to enforcement action.