The UK Financial Conduct Authority (FCA) has found a way to effectively control cryptocurrencies. It will operate within the legislative framework in which it will be possible to successfully regulate the circulation of digital assets.

The FCA has published its Consultation Paper which sets out guidance on how to regulate the cryptocurrency market. The Financial Conduct Authority offered to divide crypto assets into three categories, and then, according to this classification, apply laws to them.

The organization believes that virtual currencies pose a range of substantial risks to both traders and investors. To minimize these risks, it is necessary to clarify whether crypto assets are within the regulatory perimeter.

In the proposed classification, the financial regulator categorized the leading cryptocurrencies, such as Bitcoin and Litecoin, as exchange tokens. They cannot be considered a means of payment and be an asset for investment because of higher volatility compared to traditional fiat assets.

Security tokens, in turn, are assets that can be invested. They are subject to securities laws. Organizations issuing security tokens should apply for the FCA’s approval.

Another type of virtual coins, utility tokens, is referred to as electronic money. Their circulation is not regulated by the FCA. These assets do not grant the same rights as security tokens. Most of the stablecoins fall into this category of digital money if they are confirmed by certain assets.

Before the beginning of April 2019, the British financial regulator intends to get public feedback on this issue. After collecting all the data, the final text of the guidance on cryptocurrency regulation is expected to be published.