On July 31, the FCA issued its settled policy statement on cryptocurrencies in a document titled “PS19/22: Guidance on Cryptoassets.” The document represents an updated version of a consultation paper on crypto assets that was first released for public comment in January 2019, and intends to bring more regulatory clarity to existing types of digital assets.
In essence it describes 3 types of crypto assets.
- Exchange token: Referencing Bitcoin and Ethereum, the FCA described these tokens as “usually decentralized and primarily used as a means of exchange.” The regulator emphasized that such digital currencies do not fall under the regulatory scope of the FCA and is outside its remit.
- Security tokens: The FCA said it will be regulating security tokens as they are considered as digital assets with specific features that provide rights and obligations akin to specified investments such as shares or debt instruments
- Utility tokens: These fail the Howey test, and simply provide users with a product and/or service.
The FCA also stated that some stablecoins may fall under its remit, as they have characteristics of e-money or security tokens. Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some “stable” asset or basket of assets. A stablecoin can be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals).
For the avoidance of doubt, Scotcoin is an Exchange token.