If there’s one thing that cryptocurrency space needs right now, it’s regulatory clarity. The unclear and vague positions of governments around the world have only complicated things for everyone, and that must be fixed right now. Fortunately, an effort in that direction has been made by the Financial Conduct Authority (FCA) of the United Kingdom. The regulator of UK’s financial services market recently explained in a press release that both Ethereum and XRP have the features of a hybrid token, which means that they’re “unregulated cryptoassets”. Therefore, they don’t come under the regulatory perimeter of FCA. Here’s what FCA said:
“Consumers should be mindful of the absence of certain regulatory protections when considering purchasing unregulated cryptoassets. Unregulated cryptoassets (e.g. Bitcoin, Ether, XRP etc.) are not covered by the Financial Services Compensation Scheme and consumers do not have recourse to the Financial Ombudsman Service.”
Now you must be wondering what this hybrid token thing is! Well, it’s a term used for any crypto token that can be used as both a medium of exchange as well as a medium of utility in any particular ecosystem. Instead of classifying ETH and XRP as a security token, UK identifies them as this particular type of tokens. And since such tokens are out of the FCA’s regulatory purview, FCA calls them unregulated cryptoassets. So both Ethereum, as well as XRP, are now unlikely to be subject to the security market regulations of the UK. Clearly, US SEC needs to learn a thing or two from FCA in this matter.
The decision to classify XRP as a hybrid token along with ETH has been appreciated by the XRP community. Brad Garlinghouse was quick to react to the development on Twitter, and here’s what he said:
Applauding UK regulator, @TheFCA, for providing clarity & leadership on the classifications of digital assets. They recognize ETH has the features of a hybrid exchange/ utility token (not a security token) and call out the similarities between ETH and XRP. https://t.co/14b1lxNopO
— Brad Garlinghouse (@bgarlinghouse) July 11, 2019
Ethereum has already been classified by the FCA as a hybrid token long time ago. Bitcoin, on the other hand, is classified as an exchange token. Including XRP along with them is likely to give a boost to the adoption of XRP as regulatory uncertainty around it is now clear in the UK. Similar clarity should also be provided by the governments and regulators around the globe, but that is, unfortunately, not happening with enough pace.