You’ve definitely heard of bitcoin. You’ve definitely heard of blockchain. Now you definitely need to read our briefings on the regulatory treatment of bitcoin and other cryptoassets:
In these two briefings we outline how EU and UK regulators are approaching this new asset class. The first briefing focuses on cryptoassets in general (and what “cryptoasset” means), while the second briefing digs down into a key part of the ecosystem that has built up around them: cryptocustody.
While regulators have made it clear that cryptoassets will need to be categorised on a case-by-case basis, we explain a number of key concepts that will drive regulation in the years to come, including:
- technological neutrality – the idea that regulators will look to substance over form, and the mere fact that something is a cryptoasset will not change its regulatory status
- security tokens – the types of cryptoassets that are most likely to be subject to financial services regulation, prospectus requirements etc
- native and non-native tokens – terms that distinguish those cryptoassets that exist solely on the cryptoasset platform from those that are digitalised forms of ‘real world’ assets
We also consider the application of the UK custody and client money rules to cryptoassets and highlight some of the difficulties that could come out of being a custodian should the cryptoasset be a security token (in regulatory terms, a financial instrument).
It’s been impossible to avoid talk of cryptocurrencies over the past year. The highly volatile price of the most well-known cryptocurrency, bitcoin, has been a news story in itself. Even among the broader population of cryptocurrencies, the popularity of similarly volatile tokens offered through ICOs and STOs has been keeping commentators, investors and regulators (not to mention lawyers) busy.