A guide to Non-Fungible Tokens (NFTs), 2023 - Flipbook - Page 21
Regulation
At present, there is no separate regulatory framework applicable
to NFTs. In addition, most of the focus of the UK government on
regulation of cryptoassets has been directed at fungible assets such
as cryptocurrencies, as these more closely align with other regulated
assets such as fiat currency.
However, as can be seen from the information below, there is scope for
regulation to be expanded to encapsulate NFTs in the future, and this will be an
area for those involved with this technology to monitor closely.
Financial regulation
Currently, NFTs are not specifically regulated within the UK’s financial services
regulatory landscape. However, there are some instances in which UK financial
regulation will be applicable to NFTs.
The Financial Conduct Authority (FCA) released Guidance on Cryptoassets:
Feedback and Final Guidance to CP19/3 (PS19/22), which provides the most up
to date position in relation to the potential regulation of NFTs. In the guidance,
the FCA identifies two main types of cryptoassets, unregulated tokens and
regulated tokens.
In respect of unregulated tokens, the FCA identified two main categories:
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•
Exchange tokens: cryptoassets primarily used as a means of exchange,
such as cryptocurrency coins.
Utility tokens: cryptoassets used to provide customers with access to
products or services, a category into which many NFTs are likely to fall. See
further on the utility of NFTs at Uses of NFTs.
In respect of regulated tokens, the FCA identified a further two main categories:
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•
Security tokens: tokens that provide rights akin to specified investments,
as detailed in the Financial Services and Markets Act 2000 (Regulated
Activities) order 2001 (RAO), including those that amount to financial
instruments under the MiFID II Directive (2014/65/EU) and Markets in
Financial Instruments Regulation (600/2014) (MiFID).
Electronic-money (e-money) tokens: tokens that fall into the definition of
e-money under the Electronic Money Regulations 2011 (EMR).
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