UK Plans To Prohibit Public Crypto Offerings, Except Via Exchanges
UK regulatory agency, the Financial Conduct Authority (FCA), has published a paper outlining a new set of rules for trading crypto. One of the most impactful changes it proposes is to prohibit public crypto offerings except via crypto exchanges.
Public crypto offerings used to be a way for a new crypto coin to find funding and raise awareness of its services. However, it also led to numerous scams and irresponsible trading practices. New regulations should put a stop to that and allow the offerings to take part only within the confines of crypto exchanges.
The New Policy
The new policy clearly states that crypto offerings done outside of crypto exchanges won't be allowed and that exchanges are expected to use its oversight features to make the public coin offerings safer. The exchanges will also need to have a process for rejecting listings for trading.
In order to achieve this goal, the white paper states the Parliament should enact legislation, as such an approach isn't in accord with the current laws on crypto and exchanges. The goal of these changes is to prevent market abuses that have been known to happen in the industry.
How to Choose a Crypto Exchange
Since all initial crypto offerings will be done via crypto exchanges in the near future, users should be even more careful when choosing which crypto exchange to use. When doing so, the investors and traders should take into account a few key features the exchange needs to provide.
Reputation
A crypto exchange will hold your funds, and they will be used to buy and sell crypto coins and take part in initial coin offerings. Therefore, it's essential that it has a good reputation within the industry and among the users.
There are a few things to look for in the exchange's history. For instance, have there been any breaches or hacks before? If they did, how did they handle them, and how long did it take for things to go back to normal?
Cold Storage
The exchange stores the funds of its users, and measures need to be taken to keep those assets safe. The most important of these is the ability to hold them in a way that can't be hacked. This is known as cold storage, as it's not connected to the internet.
The user should know how much of their funds will be placed in cold storage and how much of it will be held in an online wallet that can be hacked. They should also be aware of the procedure for withdrawing their funds from the cold storage in an emergency.
Insurance
As is the case with traditional banks, crypto exchanges also offer insurance to users in case their assets get lost or hacked. With these policies, the devil is in the details, and there's a limit to how many crypto assets are covered and what constitutes a hack or a breach.
The insurance policy fees will also bite into the user's assets at least somewhat, as they are paid as a monthly expense. This may be a problem for those holding smaller amounts, but it's well worth the expense in the long run.
Regulatory Compliance
Crypto trade is becoming more regulated than ever before now that it's widely accepted and used. The same goes for the rules that crypto exchanges need to follow. Such interference from the government has made crypto trading safer but also more similar to forex or stock trading. At first, the main appeal was that it wasn't similar to those endeavors but a new financial asset in its own right.
This trend will continue and expand now that the UK authorities have added the burden of organizing initial coin offerings to the crypto exchange. Therefore, users should make sure that the exchange complies with the latest regulations before using it.
Ease of Use
Trading cryptocurrencies and buying into coin offerings don't need to be complicated, and they can be made available to beginner investors with few resources. The exchange needs to be easy to use and usable on both mobile and desktop devices.
The information that goes into trading cryptos can be quite complicated and include market trends both in the short and long term. It's equally important that the exchange presents this information in ways crypto traders can understand and follow so they can make educated trading decisions.
To Sum Up
The UK regulatory agencies have announced they plan to change the rules on how initial coin offerings are to be handled. In the future, they will be handled by crypto exchanges. This is envisioned as a way to fight against market abuses common to initial coin offerings since exchanges are already very much regulated.
Users should carefully choose which exchanges to use, especially now that they have additional purposes under new regulations. The most important features to look for are security, protection from hacks, and the ability to follow new regulations.