There is nothing new about regulators trying to beat the crypto king, Bitcoin. We have seen this over and over from pretty much all major jurisdictions. Yesterday, the U.K. Financial Conduct Authority (FCA), which oversees the banking and finance industry, released its guidance on cryptocurrencies and it didn’t ban the selling of crypto assets such as Bitcoin, Ether and Ripple’s XRP. The FCA previously said “We will shortly publish a CP on a potential ban on the sale to retail clients of derivatives and certain transferable securities that reference crypto assets”.
According to the report released yesterday, the FCA only came as far as to say that assets like Bitcoin have “no intrinsic value”. Vikram Nagrani, Partner at Hassan International Law Firm in Gibraltar, said “it is not unsurprising that the FCA should have commented that “Consumers should be cautious when investing in such crypto assets and should ensure they understand and compare the risks involved with assets that have no intrinsic value”. Any regulator will naturally want to issue such a warning to consumers, and it should not necessarily be regarded as an unhelpful comment”.
Intrinsic value generally describes the calculated value of an asset, investment or a company and in the latter case it is based on fundamentals to try and ascertain subjectively the value of a company and its current and future cash flows. There is no generally agreed standard on how to value crypto assets, because this is still a relatively new asset class where price is primarily determined by demand and supply, and price is not necessarily a reflection of value.
Philip Vasquez, Associate of TSN Law in Gibraltar, remarked that “the publication is a positive step because the FCA has acknowledged that Exchange Tokens typically would fall outside of the remit of regulated token activity. this is particularly positive given that exchange tokens arguably are among the few digital assets with real utility value”.
The key take-away is that the FCA hasn’t banned the buying and selling of crypto assets . In fact, if you read the report, one can clearly say that the language used in the FCA's paper is highly crypto friendly as it has used very familiar words such as air drops.
Remember, the FCA isn’t going to make a sudden U-turn on its stance. It isn’t JP Morgan Chase. Just like a huge ship that takes time to change its direction, I believe that the FCA’s position isn’t that different either. Remember, for regulators, cryptos were nothing more than a mean of money laundering, and now, the same product is the hottest topic on the floors of the Federal Reserve and the European Central bank. In other words, Bitcoin has made tremendous progress. Starting from a basement and used to buy a pizza, now one can buy anything from a cup of coffee to a luxury apartment in Dubai or Switzerland.
Remember, brands have value and Bitcoin is here to disrupt the banking system and this change isn’t going to come overnight. A spokesperson for the CFD (Contract of Future Derivatives) Trading & Compliance Forum, a London-based Think Tank, commented: "The latest advancements set forth by the FCA on the emerging cryptocurrency space are a clear indication that the regulators are keen to create an eco-system that supports innovation. The content has evolved from previous notifications and supports the overall ethos.” He continued by saying “guidance under CP 19/3 appeases the crypto enthusiast community with jargon and terminology that highlights the FCA's mandate to position itself as the dominant regulatory authority for next generation products and services. However, a deep dive of the paper signifies that there is still ample work required, in terms of clarifications and new legislation before the business environment is ripe. Overall it is a definite step in the right direction, and fundamentally gives innovators hope and confidence”.
To conclude, I believe that the recent regulatory guidance by the FCA is a positive step and it is only a matter of time before we see a more clear and friendly regulation on crypto assets.