The Financial Conduct Authority (FCA) has warned that companies which offer cryptocurrency trading need to be regulated or could face enforcement action. 

The City watchdog staked out its position on cryptocurrency derivatives on Friday, saying that those firms offering such instruments need to comply with all 'applicable rules' in its handbook as well as European Union regulations. 

It comes after the launch of a cryptocurrency task force, announced by chancellor Philip Hammond back in March, to examine the risks and opportunities posed by crypto assets. 

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In a statement released on its website, the FCA specifically identified three types of contracts it sees as coming under its oversight: cryptocurrency futures, cryptocurrency contracts for differences (CFDs), and cryptocurrency options.

It said, ‘It is likely that dealing in, arranging transactions in, advising on or providing other services that amount to regulated activities in relation to derivatives that reference either cryptocurrencies or tokens issued through an initial coin offering (ICO), will require authorisation by the FCA.’

While noting that it does not regulate cryptocurrencies as such, the statement said that cryptocurrency derivatives are possible ‘financial instruments under the Markets in Financial Instruments Directive II (Mifid II)'.

The body warned that it is a crime for firms to offer regulated products and services without its permission.

In the US, cryptocurrency derivatives have fallen under the jurisdiction of the Commodity Futures Trading Commission (CFTC) since 2015.

Last December the CFTC faced calls to do more to prevent Bitcoin futures from destabilising markets due to price volatility.