Last week the FCA set out which aspects of the cryptocurrency industry it regulates, as volatile digital assets come under greater scrutiny. The regulator also said it would consult later this year on a proposed ban on selling derivatives linked to certain cryptocurrencies to retail customers. Such products are increasingly harmful globally, the FCA said.

Policymakers are now working out how, if at all, cryptocurrencies come under existing financial rules, and whether fresh regulation is needed.

Regulatory approaches have varied heavily, from China’s outright banning of cryptocurrency trading to Japan’s system of licensing crypto exchanges. The FCA is aiming to create suitable rules for Britain while following global trends.

The FCA’s guidance categorises different types of so-called crypto assets to whether they fall under its regulatory net. Firms must then obtain a license from the FCA if they engage in activities that fall within that net.

The watchdog’s guidance looked at assets including “security tokens,” which resemble shares or debt, and “utility tokens”, which allow access to products or services without giving holders any rights.

While the FCA says UK-headquartered exchanges account for around 1 percent of daily global trade, London’s status as a financial hub has attracted major crypto firms. Regulatory moves by Britain are therefore closely watched.

The FCA will hold a public consultation on the guidance. It also said the government would publish a consultation paper in early 2019 on whether to change the law to broaden the watchdog’s remit to include further types of cryptocurrencies.

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