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Cryptocurrency Trade License Required: UK Financial Watchdog Sets Rules

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The UK will be rolling out a series of crypto regulations this year, if the report from Britain’s, financial watchdog is anything to go by. In a report released on Friday, the watchdog said that any firm dealing with cryptocurrency derivatives ought to meet all the stipulated rules found in the regulator’s handbook, and failure to comply could result in sanctions.

Not yet on Full Regulation

It should be noted that the Financial Conduct Authority is yet to regulate cryptocurrencies 100%. However, it has made it clear that the arrangement or dealing in transactions geared towards advising or providing any other service related to derivatives, which reference tokens or cryptocurrencies issued through an ICO, must only occur following authorization. These may include cryptocurrency contracts for differences (CFDs), cryptocurrency futures and cryptocurrency options.

Speculation and Risk

Last December, a warning from the FCA was issued to consumers that ICOs were speculative in nature and therefore high-risk. According to a similar warning from Europe’s top markets watchdog, new cryptocoins could be rendered worthless in an instant.

Effects of Regulation on Demand

It is notable that the growing demand for cryptocurrencies has steadily pushed prices to record highs, as was seen in the price of Bitcoin being $19,000 by the end of last year. This was before concerns about regulations hit the market hard, which has led to a recent dip.

The world’s 20 leading economies came together in March, to seek ways through which national regulators can monitor the cryptocurrency market and offer the best environment for trading under new financial rules. However, these affronts seem to have stopped short of coordinated action, thanks to a lack of consensus.

UK’s Bid to Understand Blockchain 

The move by the the FCA comes hot on the heels of an announcement made by the finance minister, Phillip Hammond last month. He told the national media that Britain was looking to set up a task force, which would be mandated to manage the risks associated with digital assets, while at the same time exploiting its underlying blockchain technology. The FCA believes that it is the role of these firms to make sure that they get the right permissions and authorization to trade. It says:

“If your firm is not authorized by the FCA and is offering products or services requiring authorization it is a criminal offence. Authorized firms offering these products without the appropriate permission may be subject to enforcement action.”

One regulation partner at Ashurst Law firm, Jake Green, intimated that to some extent, the FCA is clearing up a small percentage of academic uncertainty. Whatever the case however, Green believes that the decision made must be the correct one and this should not come as a surprise to many.

Image Credit: Deposit Photos

What do you think about the UK financial watchdog’s move to set regulations through which crytocurrency transactions ought to abide by? Let us know your views in the comments section below.

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