On 6 April 2018, the FCA published on its website a statement on the requirement for firms offering cryptocurrency derivatives. In the statement the FCA reminds firms that cryptocurrencies are not currently regulated provided they are not part of other regulated products or services.

The FCA states that cryptocurrency derivatives are, however, capable of being financial instruments under MiFID II although the FCA does not consider cryptocurrencies to be currencies or commodities for regulatory purposes under MiFID II.

The FCA adds that it is likely that dealing in, arranging transactions in, advising on or providing other services that amount to regulated activities in relation to derivatives that reference either cryptocurrencies or tokens issued through an initial coin offering will require FCA authorisation. This includes:

  • cryptocurrency futures – a derivative contract in which each party agrees to exchange cryptocurrency at a future date and at a price agreed by both parties;
  • cryptocurrency contracts for differences (CFDs) – a cash settled derivative contract in which the parties to the contract seek to secure a profit or avoid a loss by agreeing to exchange the difference in price between the value of the cryptocurrency CFD contract at its outset and at its termination; and
  • cryptocurrency options – a contract which grants the beneficiary the right to acquire or dispose of cryptocurrencies.