Are you trading a digital currency derivative? UK


Financial Markets Act 2000 (FSMA) is the main legislation regulating the financial services industry. This may affect you if you are trading digital currency derivatives in the UK.

Core prohibition under s.19 FSMA:

“(1)No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is—
    (a)an authorised person; or
    (b)an exempt person.”

You have to then look at what ‘regulated activity’ means in this context. S.22 provides further details:

“22 The classes of activity and categories of investment.
(1)An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and—
    (a)relates to an investment of a specified kind; or
     (b)in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.”

So it has to be a ‘specified activity’, relating to a ‘specified investment’ and be done ‘by way of business’.

Are you just trading bitcoins at spot price with immediate settlement? Bitcoins are not ‘specified investments’ so you are out of scope.

Are you trading options on bitcoins, contracts for difference, futures, then these MAY be specified investments and therefore you would need to be an ‘authorised’ or ‘exempt’ person to conduct these activities.

What if you are trading bitcoins but delaying settlement, sounds like it could be a ‘forward’ which is not necessarily regulated. Bear in mind that it really does not matter if you are doing private deals with people or posting your offers on digital currency exchanges. Check with your lawyer if unsure and communicate with the FCA on this matter to be sure.