The FCA has said it held a series of roundtables earlier this year “to gather views that can help shape how we approach regulating specific areas of crypto.”

According to the UK regulator, around 1,000 organizations involved in the industry took part in those consultations, including “crypto exchanges, banks, trading firms, blockchain analytics companies, law firms, industry associations and universities.”

The key message, perhaps, is that the regulator is serious about regulating crypto, and wants to bring everyone on board with any future regulatory regime or framework.

Given the global nature of the global industry, it makes sense that representatives from the US’s SEC were also present at these roundtables to offer their advice and insights. They sat together with UK government officials, academics and other regulatory authorities including the Treasury and Bank of England, the FCA said.

Consultations seem to have revolved around three main areas – admissions and disclosures, market abuse regime, and trading platforms and intermediaries. Here are some key takeaways.

Admissions and disclosures

The FCA seems to have put any future admissions and disclosures protocol at the heart of its crypto regulation regime. The regulator says it is a crucial aspect of the regime it’s proposing.

It explains: “Proper disclosure to investors lies at the centre of global regulatory efforts to improve the integrity of constantly evolving crypto markets.”

Participants were keen on the idea of an industry-led admissions and disclosures regime that was proportionate and tailored to different business models, like institutional and retail.

It was recognized that decentralised cryptoassets – those that have no central issuer – can be challenging. This is because compliance with some disclosure and due diligence requirements could be more difficult when crypto trading platforms can’t communicate with an issuer. Instead, they’ll need to rely on publicly available information.

Market abuse regime

When it comes to a market abuse regime, the FCA believes it can “manifest in crypto markets in novel and distinct ways, giving rise to new challenges for firms, governments and regulators.”

The regulator says any crypto version of a market abuse regime will have to deliver the same results as traditional UK market abuse regulation, which are to make sure that “financial markets run efficiently and investors can make informed decisions.”

Key takeaways from the roundtable discussions on this topic included:

• The importance of considering the international context of crypto market abuse. Participants highlighted the challenges posed by data privacy laws across jurisdictions for sharing market abuse information.
• Varying views on how to appropriately account for decentralised cryptoassets, particularly around disclosures of important information. Some participants suggested adopting disclosure rules like those in traditional finance, while others raised concerns about the difficulties and potential issues of applying this approach to crypto.

Trading platforms and intermediaries

The FCA has said it is “aiming to create a regime that puts in place strong systems and controls that enables fair, orderly, transparent and efficient trading.”

It says it takes the unique characteristics of crypto into account when deciding if a future regime “should look like for trading platforms and intermediaries – exploring topics like location policy, operational resilience requirements, conflicts of interest and matching and order execution.”

Participants welcomed the distinction between retail and wholesale for areas such as: incorporation, disclosures and customer protections, product choice and options, risk management and alignment with existing traditional finance rules.

International standards came up again, but this time in the context of their important role in supporting growth and reducing regulatory burdens.

There was in-depth discussion around the meaning and criteria of best execution for clients’ orders, as well as the relevant and helpful measurement metrics. Most participants agreed that price is not the only factor in best execution; other factors, such as custody arrangements and asset safety, are also important.

Participants thought exchanges that issue their own tokens or run other activities such as brokerage and market making pose the most significant conflicts of interest.

Progress made

The FCA reckons it has already made some progress in some of the areas that were discussed, saying “we’re leading the implementation of international crypto regulatory standards via our leading role in the International Organisation of Securities Commissions (IOSCO).

“We’re also already working with industry and the Treasury to help shape an industry-led market-abuse information sharing platform.”

But the regulator accepts that there is still work to be done and that it will have future engagements with the industry and stakeholders across the board “to get the rules right.”