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FCA Crypto

In line with the Taskforce, we have categorised cryptoassets into three types of tokens;

  • Exchange tokens: these are not issued or backed by any central authority and are intended and designed to be used as a means of exchange. They are, usually, a decentralised tool for buying and selling goods and services without traditional intermediaries. These tokens are usually outside the perimeter. These are what I like of as “money-like” digital assets and I have expanded my discussion of these in the revised paperback edition of my book “Before Bablyon, Beyond Bitcoin” that will be published in a couple of months.

  • Security tokens: these are tokens with specific characteristics that mean they meet the definition of a Specified Investment like a share or a debt instrument (described in more detail in Chapter 3) as set out in the RAO, and are within the perimeter. Given the combined demands of investor protection and “system” protection, I think we are some way from seeing these in the mass market but the idea of properly-regulated “ICO” structures has a logic to it.

  • Utility tokens: these tokens grant holders access to a current or prospective product or service but do not grant holders rights that are the same as those granted by Specified Investments. Although utility tokens are not Specified Investments, they might meet the definition of e-money in certain circumstances (as could other tokens), in which case activities in relation to them may be within the perimeter. I can envisage private currencies (the "IBM Dollar", for want of a better bumper sticker) that use this technology but I don’t see them becoming e-money because the e-money regulations as they stand effectively describe e-money as being issued against a 100% reserve rather than future delivery, if you see what I mean. I must ask someone more knowledgeable then I am about this distinction.

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