Find out about the regulation of cryptoassets and the risks of investing in cryptoassets such as ‘Bitcoin’ and ‘Litecoin’.
Cryptoassets is a broad term and covers many different types of products. The most popular forms of cryptoassets include tokens like ‘Bitcoin’ and ‘Litecoin’. We call these ‘exchange tokens’ but they are sometimes referred to as ‘cryptocurrencies’, ‘cryptocoins’, or ‘payment tokens’. Exchange tokens use a distributed ledger technology (DLT) platform and are not issued or backed by a central bank or other central authority so are not considered to be a currency or money.
Cryptoassets are considered very high risk, speculative investments. If you invest in cryptoassets, you should be prepared to lose all of your money.
Regulation of cryptoassets
Exchange tokens (such as Bitcoin and ‘cryptocurrency’ equivalents) are not currently regulated in the UK. This means that the transfer, purchase and sale of exchange tokens, including the operation of exchange token exchanges, all currently fall outside our regulatory remit.
If you invest in unregulated cryptoassets, you may not have access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if something goes wrong.
Some types of cryptoassets may be regulated depending on how they are structured. For instance, some tokens may provide rights such as ownership, repayment of a specific sum of money, or entitlement to a share in future profits. We call these ‘security tokens’ and they will fall within our regulatory remit.
Some products may also be linked to cryptoassets or derive their value from them. Derivatives that feature cryptoassets as the underlying investment will also fall under our remit. Firms who carry out any regulated activity will require FCA authorisation. We have previously published a warning about the risk of Contracts for Differences (CfDs) with cryptoassets as the underlying investment. Find out more about cryptoasset CFDs.
You can check whether a firm is authorised on our Register.
Initial Coin Offerings
Initial Coin Offerings (ICOs) can be used to create decentralised networks and/or can be a digital way of raising funds from the public using cryptoassets. An ICO can also be known as ‘token sale’ or ‘coin sale’.
ICO issuers might accept exchange tokens, like Bitcoin or Ether, in exchange for a proprietary ‘coin’ or ‘token’ that is related to a specific firm or project. ICOs vary widely in design. The digital token issued may represent a share in a firm, a prepayment voucher for future services or in some cases offer no discernible value at all. Often ICO projects are in a very early stage of development. Read more about the risks of ICOs.
Investing in cryptoassets
We have received a high number of reports of scams involving cryptoassets. Find out how to protect yourself from this type of scam.
As part of the UK Cryptoasset Taskforce, we are undertaking a range of activity to protect consumers from the risks that cryptoassets pose, while encouraging responsible development of legitimate DLT and cryptoasset-related activity. Find out more about our approach to cryptoassets.