Featured Product

    Christopher Woolard of FCA on Regulation of Crypto-Assets

    July 02, 2019

    While speaking at the Cambridge Center for Alternative Finance annual conference, Christopher Woolard of FCA examined the ongoing work in regulation of crypto-assets and the potential challenges in regulating financial innovation in this area. He highlighted that early engagement is incredibly valuable for monitoring, supervisory, and policy purposes. Working with innovative firms helps to achieve a better bird’s-eye view, thus enhancing understanding when the overall landscape is blurry and ­changing quickly. He also discussed how FCA looks to critically analyze different cryptoassets and why labels such as "stablecoin" are not very helpful.

    Mr Woolard explained that market participants use "stablecoin" as a broad term that encompasses a variety of different types of cryptoassets. An October 2018 joint report by BoE, FCA, and HM Treasury categorized crypto-assets into exchange tokens, security tokens, and utility tokens. A stablecoin could also refer to a crypto-asset backed by fiat currency. In certain cases, a fiat-collateralized crypto-asset could constitute e-money if it meets the definition provided in the Electronic Money Regulations. He said that this makes us question how useful the term stabledcoin is when it comes to labeling all these different tokens. He added that a stablecoin could fall within or between one of the several regulatory categories. If a cryptoasset is e-money, then the issuer needs to be authorized as an e-money issuer and needs to comply with all relevant requirements under the E-Money and Payment Services Regulations. The term stablecoin could equally apply to algorithmically controlled tokens or those backed by real world assets such as securities or, indeed, other cryptoassets.

    He added that FCA seeks to consider any crypto-asset, including those labeled stablecoin, on a case-by-case basis and encourages both consumers and firms to do likewise. Stablecoins would need to be evaluated on their characteristics, but could amount to regulated products, including, for example, collective investment schemes. This analysis is particularly important when identifying whether a specific crypto-asset sits within the regulatory perimeter or outside of it. Depending on its structure it could be many things—for instance, a derivative, a unit in a collective investment scheme, another kind of security or e-money. He also discussed how innovators should navigate the landscape and what approach regulators should take. "Innovation won’t pause whilst regulators in different jurisdictions each scramble to get the best snapshot—that is why it is critical that regulators work in concert internationally on fast-moving, cross-border issues."

    According to Mr. Woolard, big surprises in financial markets do not generally end in positive outcomes for consumers, regulators, or firms. Therefore, FCA invites firms to consider applying to its innovation firm support services, such as direct support, which provides regulatory feedback for eligible innovative propositions or the Regulatory Sandbox, which provides firms with the opportunity to setup compliant and controlled tests. FCA has worked with many innovative firms on crypto-assets to-date—over a third of propositions accepted to test in the Sandbox so far have involved an application of distributed ledger technology. Not only does this help bolster competition by helping innovative firms overcome regulatory barriers, to the benefit of markets and consumers, but also to learn more about fast-moving, developing technologies potentially disrupting financial services over time, added Mr. Woolard.

     

    Related Link: Speech

     

    Keywords: Europe, UK, Banking, Securities, Crypto-Assets, Distributed Ledger Technology, Stablecoin, Fintech, Regtech, Regulatory Sandbox, FCA

    Related Articles
    News

    APRA Revises Standard on Margin Rules for Uncleared Derivatives

    APRA revised CPS 226, which is the prudential standard on margin and risk mitigation requirements for non-centrally cleared derivatives.

    September 19, 2019 WebPage Regulatory News
    News

    SEC Adopts Rules and Amendments Under Regulatory Regime for Swaps

    SEC announced that it took a significant step toward establishing the regulatory regime for security-based swap dealers (SBSDs) by adopting a package of rules and rule amendments under Title VII of the Dodd-Frank Act.

    September 19, 2019 WebPage Regulatory News
    News

    PRA Issues Consultation on Prudent Person Principle Under Solvency II

    PRA, via the consultation paper CP22/19, has set out its proposed expectations for investment by firms, in accordance with the Prudent Person Principle (PPP).

    September 18, 2019 WebPage Regulatory News
    News

    PRA Proposal on Probability of Default and LGD Estimation

    PRA proposed, via the consultation paper CP21/19, an approach to implementing EBA’s recent regulatory products relating to Probability of Default (PD) estimation, Loss Given Default (LGD) estimation, and the treatment of defaulted exposures in the internal ratings-based (IRB) approach to credit risk.

    September 18, 2019 WebPage Regulatory News
    News

    BIS Formalizes Agreement to Set Up Innovation Hub in Hong Kong SAR

    BIS and HKMA signed the Operational Agreement on the BIS Innovation Hub Center in Hong Kong Special Administrative Region (SAR).

    September 18, 2019 WebPage Regulatory News
    News

    APRA Observations from Thematic Review on Recovery Plans of Insurers

    APRA issued a letter to general insurers and life insurers, outlining observations from a recent thematic review on recovery planning by insurers.

    September 18, 2019 WebPage Regulatory News
    News

    BNM Publishes Financial Stability Review for the First Half of 2019

    BNM published Financial Stability Review for the first half of 2019.

    September 18, 2019 WebPage Regulatory News
    News

    CFTC Extends Comment Period for Proposals on Cross-Border Clearing

    CFTC announced that it is extending, until November 18, 2019, the comment period for the proposal for an alternative compliance framework for derivatives clearing organizations (DCOs) that are organized outside of U.S. and that do not pose substantial risk to the U.S. financial system.

    September 18, 2019 WebPage Regulatory News
    News

    FASB Issues Summary of Tentative Board Decisions at September Meeting

    FASB published a summary of the tentative decisions taken at its Board meeting in September 2019.

    September 18, 2019 WebPage Regulatory News
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3848