Cryptoassets: our work

How we define cryptoassets

Cryptoassets are cryptographically secured digital representations of value or contractual rights that use some type of distributed ledger technology (DLT) and can be transferred, stored or traded electronically.

We have created a framework by categorising cryptoassets based on their intrinsic structure, as well as their designed use:

Regulated tokens

• Security tokens: These are tokens that amount to a ‘Specified Investment’ under the Regulated Activities Order (RAO), excluding e-money. These may provide rights such as ownership, repayment of a specific sum of money, or entitlement to a share in future profits. They may also be transferable securities or other financial instrument under the EU’s Markets in Financial Instruments Directive II (MiFID II)[3]. These tokens are likely to be inside the FCA’s regulatory perimeter.
• E-money tokens: These are tokens that meet the definition of e-money under the Electronic Money Regulations (EMRs)[4]. These tokens fall within regulation.

Unregulated tokens

• Any tokens that are not security tokens or e-money tokens are unregulated tokens. This category includes utility tokens which can be redeemed for access to a specific product or service that is typically provided using a DLT platform. 
• The category also includes tokens such as Bitcoin, Litecoin and equivalents, and often referred to as ‘cryptocurrencies’, ‘cryptocoins’ or ‘payment tokens’. These tokens are usually decentralised and designed to be used primarily as a medium of exchange. We sometimes refer to them as exchange tokens and they do not provide the types of rights or access provided by security or utility tokens, but are used as a means of exchange or for investment.

You can find out more about which cryptoasset activities we regulate in PS19/22: Guidance on Cryptoassets[5]. Any firm carrying on a regulated activity will need to be authorised by us. Find out more about the authorisation process[6].

Firms carrying on cryptoasset activity

In July 2019, The Economic Crime Plan[7] announced that from January 10, 2020 the FCA will be the Anti Money Laundering and Countering Terrorist Financing (AML/CTF) supervisor for firms carrying on certain cryptoasset activity. See our dedicated cryptoassets AML regime webpages[8] for more information. 

The AML/CTF regime will aim to ensure that businesses carrying on in-scope cryptoasset activity can spot, disrupt or stop money being laundered through the system.

In June 2023, we published our final rules for cryptoasset financial promotions in PS23/6.[9] In addition, in November 2023 we published Finalised Guidance for cryptoasset financial promotions (FG23-3)[10] which provides information on, and sets out our expectations of, the communication and approval of financial promotions for qualifying cryptoassets.

On 8 October 2023, qualifying cryptoassets came into our remit. The cryptoasset financial promotions regime applies to all firms marketing cryptoassets to UK consumers, regardless of whether the firm is based overseas or what technology is used to make the promotion.

There are 4 routes to legally promoting cryptoassets to consumers:

• the promotion is communicated by an authorised person
• the promotion is made by an unauthorised person but approved by an authorised person
• the promotion is communicated by (or on behalf of) a cryptoasset business registered with the FCA under the MLRs in reliance on the exemption in Article 73ZA of the Financial Promotion Order
• the promotion is otherwise communicated in compliance with the conditions of an exemption in the Financial Promotion Order

Investment products that reference cryptoassets

While some cryptoassets are outside the FCA’s perimeter, investment products such as derivatives contracts that reference these cryptoassets are likely to be within our perimeter, as we have previously stated[11].

Due to our concerns about the ability of retail consumers to reliably value and assess the risks of investing in such products, we have prohibited the sale of derivatives and exchange traded notes referencing cryptoassets. Read more about our position[12].

The UK Cryptoasset Taskforce

The UK Government announced the Taskforce in March 2018 as part of its wider Fintech strategy and in response to the Treasury Select Committee’s investigation into digital currencies. The objective of the Taskforce was to bring the Treasury, Bank of England and the FCA together to assess the potential impact of cryptoassets and DLT in the UK and to consider appropriate policy responses. The Taskforce published its report[13] on 26 October 2018.

The Taskforce concluded that while DLT is at an early stage of development, it has the potential to deliver significant benefits in financial services and other sectors in the future, and all 3 authorities committed to supporting its development. This is in line with previous statements made by the FCA. The Taskforce also saw some evidence that certain types of cryptoassets have the potential to deliver benefits in the future, for example when used as an innovative capital raising tool or as an intermediary step for international money transfers; but noted that harnessing these potential benefits requires effective action to manage the range of risks observed in the current cryptoasset market.

This includes:

• Risks of financial crime, including opportunities for cryptoassets to be used for illicit activity and cyber threats.
• Risks to consumers, who may buy unsuitable products, face large losses, be exposed to fraudulent activity, struggle to access market services, or be exposed to the failings of service providers.
• Risks to market integrity, which may lead to consumer losses or damage confidence in the market.
• Potential implications for financial stability, which may arise if the market grows and cryptoassets are more widely used.

Further support

If your firm is looking to develop innovative propositions using crypto assets, we may be able to offer support via our Innovation Hub[14].

Our Innovation Hub supports innovative businesses to launch new products or services that benefit consumers. 

We’ve worked with a significant number of cryptoasset related business models, primarily through the Regulatory Sandbox and Innovation Pathways. 

Find out more about our innovation support and services[15].