FCA Handbook - PERG 18.8 Activity: intermediary activities

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PERG 18.8 Activity: intermediary activities

Question 8.1: When do dealing and arranging activities involving qualifying cryptoassets require authorisation?

This section sets out perimeter considerations in relation to the regulated activities of dealing in qualifying cryptoassets (as principal or agent) and arranging deals in qualifying cryptoassets. This relates to persons acting on behalf of clients as well as persons dealing on own account.

As set out in the guidance in this section, dealing and arranging deals is broadly prescribed in legislation. Whether a person who is dealing or arranging requires authorisation is contingent on the factors set out in PERG 2 and PERG 18.1.11. For example, a person may be dealing in qualifying cryptoassets (as principal or agent) when buying and selling qualifying cryptoassets on a QCATP. If they do so in a capacity which does not meet the by way of business test, such persons would not require authorisation. It is therefore important for persons to consider all factors in determining whether they require authorisation.

Question 8.2: What are the dealing and arranging activities for qualifying cryptoassets?

The new cryptoasset activities of dealing in qualifying cryptoassets as principal, dealing in qualifying cryptoassets as agent and arranging deals in qualifying cryptoassets mirror the existing regulated activities of dealing in investments as principal (article 14 of the Regulated Activities Order), dealing in investments as agent (article 21 of the Regulated Activities Order), arranging (bringing about) deals in investments (article 25(1) (Arranging deals in investments) of the Regulated Activities Order) and making arrangements with a view to transactions in investments (article 25(2)). As such, the new regulated cryptoasset activities are expected to operate similarly to articles 14, 21 and 25, albeit the effect of related exclusions, as discussed in PERG 18.8.3 and PERG 18.8.4, differs. Perimeter guidance on the article 14, 21 and 25 activities can be found in PERG 2.7.

Question 8.3: What is dealing in qualifying cryptoassets (as principal or agent)?

Both the activities of dealing in qualifying cryptoassets as principal and dealing in qualifying cryptoassets as agent (articles 9T (Dealing in qualifying cryptoassets as principal) and 9W (Dealing in qualifying cryptoassets as agent) of the Regulated Activities Order) are defined in terms of ‘buying, selling, subscribing for or underwriting’ qualifying cryptoassets.

As set out in PERG 2.7.6AG, to deal with the possible range of circumstances, ‘buying’ is defined in the Regulated Activities Order to include acquiring for valuable consideration. ‘Selling’ is defined to include disposing for valuable consideration and ‘disposing’ is itself given a specified meaning that covers a range of possible transactions. Buying and selling qualifying cryptoassets therefore captures a broad range of transactions and business models involving qualifying cryptoassets. This is regardless of how such transactions may be marketed or described. For example, a person may be engaged in the activity of dealing in qualifying cryptoassets (as principal or agent) when dealing on own account, acting as a single dealer platform, engaged in matched principal trading or engaged in qualifying cryptoasset lending or borrowing. See PERG 18.7.2 and PERG 18.9.1.

The Regulated Activities Order is not prescriptive in setting out what the qualifying cryptoasset is exchanged for. This, however, is subject to the goods and services exclusion described in PERG 18.11.4 and PERG 18.11.5.

The scope of dealing in qualifying cryptoassets does not extend to specified investment cryptoassets. Nor does it extend to specified investments or financial instruments which may be linked to qualifying cryptoassets such as qualifying cryptoasset derivatives or cryptoasset exchange traded notes. Buying and selling activities involving such products fall within the scope of dealing in investments as principal or dealing in investments as agent.

Exclusions to the dealing activities are discussed in PERG 18.8.5, and PERG 18.8.11 to PERG 18.8.19.

Question 8.4: What is arranging deals in qualifying cryptoassets?

As with ‘arranging deals in investments’ (article 25 of the Regulated Activities Order), arranging deals in qualifying cryptoassets includes 2 distinct regulated activities. Article 9Y (Arranging deals in qualifying cryptoassets) of the Regulated Activities Order is divided into ‘arranging (bringing about) deals in qualifying cryptoassets’ and ‘making arrangements with a view to transactions in qualifying cryptoassets’. As set out in PERG 2.7.7BG, the former is aimed at arrangements that would have the direct effect that a particular transaction is concluded (that is, arrangements that bring it about). The latter is concerned with arrangements of an ongoing nature the purpose of which is to facilitate the entering into of transactions by other parties.

Examples of activities that may amount to arranging (bringing about) deals in qualifying cryptoassets under article 9Y(1) include receiving and transmitting a client’s order or instruction in relation to a qualifying cryptoasset to another person for execution. This regulated activity may also include bringing together 2 or more investors in a way that facilitates a transaction in qualifying cryptoassets. Readers may find it useful to be aware that, in the context of financial instruments, the reception and transmission of orders will typically amount to arranging (bringing about) deals in investments (see PERG 13.3 Q13 and PERG 13 Annex 2). The FCA considers that the inclusion of analogous activities within article 9Y(1) is consistent with that approach.

The ability to influence, direct or exercise discretion over whether a transaction in a qualifying cryptoasset is entered into by another person is not a necessary element of arranging deals in qualifying cryptoassets; nor is having control over the qualifying cryptoassets. A person with authority to enter into transactions in qualifying cryptoassets on behalf of another person should consider whether they are dealing in qualifying cryptoassets as agent (see PERG 18.8.3); whereas a person who exercises control over qualifying cryptoassets should consider whether they are safeguarding cryptoassets (see PERG 18.6).

Making arrangements with a view to transactions in qualifying cryptoassets has a potentially broad scope as the arrangements do not need to bring about a particular transaction (see PERG 18.8.20). It can capture arrangements such as those which:

(1) enable or assist investors to deal with or through a particular firm (such as the arrangements made by introducers); or
(2) facilitate the entering into of transactions directly by the parties, such as through a platform (except where it forms part of the activity of operating a qualifying CATP).

For arrangements to fall within article 9Y(2), they must be made with a view to a person participating in the arrangements buying, selling, subscribing for or underwriting a qualifying cryptoasset. This means that a person making arrangements must take account of the purpose for which the arrangements are made.

The guidance in PERG 2.7.7G to PERG 2.7.7CG (including the other areas of PERG referred to in those sections) should also be considered by persons when considering whether they are arranging deals in qualifying cryptoassets. In short, this guidance sets outs the following:

(3) Making arrangements with a view to transactions is not limited to arrangements that are participated in by investors. A person may be carrying on this regulated activity even if they are only providing part of the facilities for bringing about a transaction. Making arrangements with a view to transactions in qualifying cryptoassets does not need to be causative of the transaction in the sense that it brings it about, but nonetheless helps it to happen. Nor is it necessary that all the parties to the transaction being arranged should participate in the arrangements.
(4) Certain arrangements may come within the activity even though the parties may have already committed to the transaction using other arrangements. For example, persons providing arrangements to facilitate the conclusion of a transaction such as settlement services or other services offered to complete the transaction akin to clearing houses can be within scope of the arranging deals in qualifying cryptoassets activity.
(5) Passive display of literature does not amount to making arrangements with a view to transactions. However, the guidance in PERG 8.32.3G to PERG 8.32.8G should be considered in relation to arranging and the financial promotions regime. Readers may also find it helpful to refer to the guidance at PERG 18.8.8 regarding whether the provision of information, analytics, research, market data and dashboard services amounts to arranging deals in qualifying cryptoassets.
(6) In the FCA’s view, making arrangements with a view to transactions in qualifying cryptoassets includes certain types of arrangements where persons will be introduced to one another. Readers may find the guidance on introductions in the context of article 25(2) of the Regulated Activities Order at PERG 2.7.7BDG helpful. Guidance on the exclusion in article 9Z1 (Article 9Y exclusion: introducing) of the Regulated Activities Order can be found in PERG 18.8.21.

More generally, the activity of making arrangements with a view to transactions in qualifying cryptoassets is also of relevance to software-based or connectivity services, which can take various forms. Whether article 9Y(2) applies will depend on the nature of the services provided and the purpose for which the arrangements are made. Developing software is not a regulated activity as such. But software can be used to facilitate transactions. Where software is used in this way, it may constitute the carrying on of one or more regulated activities. The person(s) who need to be authorised for this will typically be those person(s) who provide access to, or use of, that software, not necessarily the developers of it. Similarly, where software is provided to authorised persons to do things such as managing records of investment transactions or providing services peripheral to the regulated activities undertaken by those authorised persons, this should not generally be caught by article 9Y.

On the other hand, where a website host or app provider is providing users with the means by which they can place orders, this is likely to amount to the activity of making arrangements with a view to transactions in qualifying cryptoassets, unless an available exclusion applies. Where the person provides users with the means to make, place or otherwise send orders and receive confirmation that a transaction has been completed, this may amount to both forms of arranging deals in qualifying cryptoassets. In determining the status of the website host or app provider, it is necessary to look at the provision of services as a whole, including the features available to users, and whether and how they enable users to place orders or deal directly in qualifying cryptoassets.

Arranging transactions may also capture a range of services, such as a platform which arranges qualifying cryptoasset lending or borrowing or other platforms that provide a means to trade which is not captured as a QCATP. This includes but is not limited to arrangements such as providing trading apps, providing access to QCATPs or dealers or other qualifying cryptoasset execution venues, or facilitating transactions between parties on a qualifying cryptoasset lending or borrowing platform.

Persons should consider the substance of the service they provide and whether they are providing arrangements for persons to buy and sell qualifying cryptoassets. As noted in PERG 18.8.3, buying and selling has a broad scope and arranging deals in qualifying cryptoassets therefore also covers a broad range of business models and transactions.

Guidance on exclusions to the arranging activity are set out in PERG 18.8.20 to PERG 18.8.24.

Question 8.5: Does a person issuing qualifying stablecoins need dealing permission?

The new activities of dealing in qualifying cryptoassets (as principal or agent), arranging deals in qualifying cryptoassets and making arrangements with a view to transactions in qualifying cryptoassets have an exclusion for the activity of issuing a qualifying stablecoin. The scope of the issuing a qualifying stablecoin activity is set out in PERG 18.5.

As noted in PERG 18.5.1, the issuing a qualifying stablecoin activity has 3 limbs. It is only where a person (who has created the qualifying stablecoin or on whose behalf it was created) undertakes or arranges for another to undertake all 3 limbs that they are undertaking the issuing a qualifying stablecoin activity and are excluded from dealing in qualifying cryptoassets (as principal or agent) or arranging deals in qualifying cryptoassets. If they are not undertaking the issuing activity under article 9M of the Regulated Activities Order, they will not benefit from the exclusion from dealing.

Where a person undertakes issuance or redemption for a qualifying stablecoin but does not fall within scope of the issuing a qualifying stablecoin activity, they may require a dealing permission. This could be due to a number of different circumstances, including where:

(1) they do not fulfil the territorial criteria for issuing a qualifying stablecoin in that they are not carrying out activity from an establishment in the UK (see PERG 18.3.5);
(2) they do not fulfil all the criteria of the issuing a qualifying stablecoin activity – for example, by only undertaking 1 limb of the activity; and/or
(3) the qualifying cryptoasset that they issue does not meet the criteria of a qualifying stablecoin.

Therefore, where a person is not carrying out issuing a qualifying stablecoin, for example:

(4) an overseas issuer who is not considered to be issuing a qualifying stablecoin in the UK; or
(5) a person who is appointed by an overseas issuer to undertake redemption on their behalf (as a third-party appointee),

the exclusion from dealing (as principal or agent) or arranging for issuing a qualifying stablecoin will likely not be available.

Persons should consider whether a permission for dealing in qualifying cryptoassets is needed. A person who arranges issuance or redemption may require an arranging permission.

Question 8.6: Does a person issuing qualifying cryptoassets need a dealing permission?

Where a person issues qualifying cryptoassets by offering qualifying cryptoassets for sale (or offers for persons to subscribe for or underwrite them) this may fall within scope of dealing. Issuers should consider whether they are excluded from the dealing activity. See PERG 18.8.17 and PERG 18.8.19.

Where an overseas person issues qualifying cryptoassets to consumers in the UK, the provisions of section 418 of the Act relating to territorial scope for dealing will be relevant. See PERG 18.3.2.

Persons who arrange transactions between a client and an issuer may require an arranging permission.

Exclusions may apply to a person issuing their own cryptoassets, such as where they are issued to employees for raising capital or the distribution of rewards for arranging qualifying cryptoasset staking. See the guidance at PERG 18.8.11, PERG 18.8.14 and PERG 18.8.15.

Question 8.7: Does a person providing or arranging wrapping or bridging services need dealing/arranging permission?

Wrapping services and bridging services can be structured in a number of different ways and are not, in themselves, distinct regulated activities. Depending on how a particular service is structured and operated, carrying on wrapping or bridging activities may involve carrying on one or more regulated cryptoasset activities.

Wrapping services may involve the creation, issuance, redemption or exchange of a wrapped token relating to an underlying cryptoasset. Bridging services may involve enabling a cryptoasset, or the value represented by a cryptoasset, to be transferred, represented or used across distributed ledger networks.

Whether a person carrying on wrapping or bridging activities is carrying on a regulated cryptoasset activity will depend on the substance of the activity and the particular facts and circumstances, including whether any exclusions apply. Given the variety of ways in which such services may be structured and offered, this assessment will need to be undertaken on a case-by-case basis.

As noted in PERG 18.8.3, dealing in this context involves buying, selling, subscribing for or underwriting a qualifying cryptoasset as principal (or as agent). Both buying and selling are broadly defined. Depending on how they are structured and operated, wrapping or bridging arrangements may involve dealing in qualifying cryptoassets (as principal or agent). For example, wrapping or bridging services may fall within the dealing activity because they involve the sale and purchase of qualifying cryptoassets. However, persons facilitating wrapping or bridging for another may fall within scope of arranging deals in qualifying cryptoassets (see PERG 18.8.4). In addition, where a wrapping or bridging arrangement is structured and operated on a custodial basis, a person should also consider whether they are carrying on the regulated activity of safeguarding qualifying cryptoassets (see PERG 18.6).

Question 8.8: Does providing information, analytics, data or dashboard services amount to arranging deals in qualifying cryptoassets?

The provision of information, analytics, research, market data or dashboard services does not, of itself, amount to arranging deals in qualifying cryptoassets.

Whether a person is carrying on that regulated activity depends on the role that they perform in relation to arranging transactions in qualifying cryptoassets. The relevant question is not whether the service provides information that may be useful to a person making a trading decision, but whether the service forms part of the arrangements by which transactions are facilitated or entered into.

A person whose role is limited to solely collecting, displaying, analysing or transmitting information is less likely to be carrying on the regulated activity. This may include, for example, the provision of price feeds, market data, blockchain analytics, research or informational content, or screening, filtering or search functionality.

However, the fact that a service is described as an information, analytics or dashboard service is not determinative. A person may be arranging deals in qualifying cryptoassets where the service goes beyond the provision of information and performs a role in facilitating transactions in qualifying cryptoassets.

Relevant considerations may include whether the service enables, supports or facilitates users to identify counterparties or execution venues, transmit or route orders, access trading functionality, enter into, negotiate or execute transactions, or otherwise participate in the transaction process.

The assessment will depend on the facts and circumstances of the particular case, including the functionality offered to users and the extent to which that functionality forms part of the arrangements by which transactions in qualifying cryptoassets are effected.

The fact that a service may influence a person’s decision whether to buy, sell or hold a qualifying cryptoasset does not, on its own, necessarily mean that the person providing the service is arranging deals in qualifying cryptoassets.

Persons will also need to consider whether they are making financial promotions. See PERG 8.

Question 8.9: I manage investments for clients, including cryptoassets. What permissions do I need?

To carry on the regulated activity of managing investments, the property being managed must consist of, or include, securities, structured deposits or contractually based investments. Alternatively, discretionary portfolio management will generally fall within the scope of this regulated activity where it is possible that the property could consist of, or include, such investments, provided that the other elements of the regulated activity are satisfied. This is the case even if there never has been any investment in these products, as long as there have been representations that there would be. Accordingly, the regulated activity of managing investments is particularly relevant in relation to relevant specified investment cryptoassets, which, by definition, are securities or contractually based investments.

Managing investments in relation to qualifying cryptoassets is not introduced as a new regulated cryptoasset activity under the Cryptoassets Regulations. Where:

(1) the property managed consists exclusively of qualifying cryptoassets; and
(2) there is no possibility under the management arrangements that the property managed could ever consist of or include securities, structured deposits or contractually based investments,

managing that property will not amount to the regulated activity of managing investments.

Further guidance on the regulated activity of managing investments can be found in PERG 2.7.8G.

Persons whose mandate includes the trading of qualifying cryptoassets for clients should consider whether they also need permission for regulated cryptoasset activities such as dealing in qualifying cryptoassets (as principal or agent), arranging deals in qualifying cryptoassets, safeguarding cryptoassets or arranging cryptoasset safeguarding.

Persons who have a permission for managing investments will need to apply for a variation of permission to undertake any regulated cryptoasset activities. However, managers of an AIF or a UK UCITS may benefit from the exclusion in article 72AA (Managers of UK UCITS and AIFs) of the Regulated Activities Order. See PERG 18.11.2.

Activities that are not regulated cryptoasset activities may nevertheless be relevant for the purposes of the Financial Promotion Order. Persons communicating financial promotions in connection with cryptoassets, or in connection with managing investments, should therefore consider whether the financial promotion regime applies to their communications, including any applicable restrictions and requirements (see PERG 8).

Question 8.10: Do I need Part 4A authorisation to advise on cryptoassets?

Providing investment advice in relation to qualifying cryptoassets is not, in itself, a regulated activity. However, where a person does more than advise clients on qualifying cryptoassets, and also facilitates transactions, routes orders or provides any additional service, this could constitute a regulated activity. Therefore, the nature of the advisor’s services should be considered in totality to identify whether any regulated activity (including a regulated cryptoasset activity) might be involved.

Where a person advises clients in connection with specified investment cryptoassets, they should consider whether they require permission to carry on the regulated activity of advising on investments (except P2P agreements) (see PERG 2.7.14CG to PERG 2.7.16AG, and PERG 8.24).

Readers should also note that the perimeter for the purposes of the Regulated Activities Order is different to that of the Financial Promotion Order. As such, any person communicating a financial promotion in connection with a cryptoasset, or in connection with advising on investments, should also consider whether the financial promotion regime applies to their activities, including any applicable restrictions and requirements (see PERG 8).

Question 8.11: What exclusions apply across intermediary activities?

The activities of dealing in qualifying cryptoassets (as principal or agent) and arranging deals in qualifying cryptoassets have a number of shared exclusions. These are:

(1) the creation, including the design, of a qualifying stablecoin;
(2) the minting of a qualifying stablecoin;
(3) the acquisition or transfer of a qualifying cryptoasset for no consideration;
(4) the distribution of a qualifying cryptoasset that was automatically created as a reward for the maintenance of the distributed ledger or the validation of transactions;
(5) sale to employees;
(6) intra-group transactions (not applicable to dealing as agent); and
(7) exclusion for the issuing a qualifying stablecoin, arranging qualifying cryptoasset staking and operating a qualifying CATP activities.

Question 8.12: What is the creating and minting exclusion?

Creation (including design) and minting (ie, undertaking the technical process to create a qualifying stablecoin) are unlikely to be captured as dealing or arranging unless they involve the buying and selling of a qualifying stablecoin.

The exclusions for creating (including design) and minting of a qualifying stablecoin are intended to close a gap between the issuing activity and the dealing activity. If a person is undertaking a technical activity of creating a coin or minting it distinct from a transaction, that activity will likely fall outside the scope of dealing and arranging. A person who is issuing a qualifying stablecoin does not require permission for dealing in qualifying cryptoassets (as principal or agent) or arranging deals in qualifying cryptoassets.

If a person engages in transactions where they mint and offer qualifying stablecoins as part of a transaction, parts of this process (the offer and sale, etc) may be part of a regulated activity which does not benefit from this exclusion. See the guidance at PERG 18.5.1, PERG 18.8.5 and PERG 18.8.6.

Question 8.13: I receive or provide qualifying cryptoassets through ‘airdrops’. Do I require Part 4A authorisation?

Where a person ‘airdrops’ a qualifying cryptoasset or receives an airdropped qualifying cryptoasset, this may be excluded from dealing and arranging where there is no consideration provided. ‘Airdrop’ is a non-technical industry term and can cover a range of ways that qualifying cryptoassets are distributed. The labelling of such transfers is not a relevant factor in determining whether this exclusion applies.

This exclusion provides certainty that persons who provide qualifying cryptoassets for no consideration are not dealing; nor are those who receive the qualifying cryptoassets. Persons arranging such transfers may also benefit from the exclusion. Where there is some form of consideration provided, this exclusion will not apply. The ‘by way of business’ requirement as well as the holding out exclusion (see PERG 18.2 and PERG 18.8.18) may also be relevant here.

Question 8.14: What is the scope of the reward distribution exclusion?

The reward distribution exclusion for dealing in qualifying cryptoassets (as principal or agent) and arranging deals in qualifying cryptoassets only applies in respect of the distribution of qualifying cryptoassets which were automatically created as a reward for maintenance of the distributed ledger or the validation of transactions.

This is a limited exclusion intended to capture the distribution of qualifying cryptoassets created through blockchain validation processes such as qualifying cryptoasset staking. It is also limited to the initial distribution to the person who automatically receives the qualifying cryptoasset. It does not extend to subsequent distribution of the qualifying cryptoasset.

In practice, this exclusion will be of limited effect as the distribution of rewards is part of the activity of arranging qualifying cryptoasset staking, which is itself carved out of dealing and arranging activities.

Question 8.15: I issue qualifying cryptoassets to employees as a reward scheme. Do I need authorisation?

It is unlikely that this activity will require authorisation. There is an exclusion from dealing in qualifying cryptoassets (as principal or agent) and arranging deals in qualifying cryptoassets where a qualifying cryptoasset is issued by or on behalf of a person and sold to or subscribed to by an employee or partner of the person carrying on the activity.

This activity only applies to the person who issues the qualifying cryptoasset or another who does so on behalf of that person. It would not apply to a third party who is neither such person.

Question 8.16: What is the exclusion for group companies?

There are 2 intra-group transaction exclusions which apply, respectively, to dealing in qualifying cryptoassets as principal and arranging deals in qualifying cryptoassets. The general principle here is that as long as activities that would otherwise be regulated activities take place wholly within a group of companies, they are excluded:

(1) The exclusion from dealing in qualifying cryptoassets as principal applies where a person only enters into transactions as principal with other members of the same group.
(2) The exclusion from arranging deals in qualifying cryptoassets applies where:
1. (a) the person only makes arrangements for, or with a view, to a transaction which is or is to be entered into as principal by another member of the same group; and
2. (b) the person makes such arrangements where it is not otherwise required to be authorised to carry on regulated cryptoasset activities.
3. If the conditions in (a) and (b) are met and persons relying on this exclusion do not otherwise deal with or arrange deals for non-group companies, there is no need for authorisation.

Question 8.17: What does it mean for issuing a qualifying stablecoin, operating a qualifying CATP and arranging qualifying cryptoasset staking to be excluded from dealing and arranging?

These exclusions carve out any activity from dealing in qualifying cryptoassets (as principal or agent) or arranging deals in qualifying cryptoassets which is specified by the issuing a qualifying stablecoin, operating a qualifying CATP or arranging qualifying cryptoasset staking activity.

Where a person is issuing a qualifying stablecoin, this exclusion will only apply where they undertake (including by arranging for others to undertake parts of) the issuing a qualifying stablecoin activity such that they are required to be authorised as a qualifying stablecoin issuer. The implications of this exclusion and issuing are addressed in PERG 18.8.5 and PERG 18.8.11.

Similarly, the exclusion for operating a qualifying CATP is only relevant for the activities that constitute the regulated cryptoasset activity of operating a qualifying CATP when undertaken by the operator in that capacity. For example, a QCATP operator that also offers brokerage services will not have those services excluded.

Often, the activity of arranging qualifying cryptoasset staking will involve the arrangement of qualifying cryptoasset staking as well as the distribution of rewards earned. As such, a person arranging qualifying cryptoasset staking could be carrying on the regulated cryptoasset activity of dealing in qualifying cryptoassets (as principal or agent) or arranging deals in qualifying cryptoassets with respect to the distribution of rewards. Because this exclusion specifies arranging qualifying cryptoasset staking, a person who has permission to carry on this activity will not also need permission for dealing in qualifying cryptoassets (as principal or agent) or arranging deals in qualifying cryptoassets for those activities carried on in relation to arranging qualifying cryptoasset staking that could be in scope of dealing or arranging.

Question 8.18: What are the exclusions for the activity of dealing in qualifying cryptoassets as principal?

Of particular significance is the exclusion in article 9U (Article 9T exclusion: absence of holding out etc.) of the Regulated Activities Order. This exclusion applies where a person does not hold themselves out as:

(1) willing as principal to buy and sell qualifying cryptoassets generally and continuously;
(2) engaged in the business of dealing in them; or
(3) regularly soliciting members of the public with the purpose of inducing them to deal.

Holding out is to be considered in light of all the circumstances, and includes but is not limited to statements a person makes by means of advertisements or otherwise, as well as a person’s conduct. For example, in the FCA’s view, the mere fact of a private individual being a user of a QCATP does not mean that the individual holds themselves out as engaging in the business of buying qualifying cryptoassets of the kind to which the transaction relates, with a view to selling them.

A person will not be treated as carrying on the activity of dealing in qualifying cryptoassets as principal if they enter into a transaction as principal while acting as bare trustee (or, in Scotland, as nominee).

Question 8.19: What is the raising capital exclusion for dealing in qualifying cryptoassets?

This exclusion refers to a limited circumstance where a person (A) or someone on their behalf creates and mints qualifying cryptoassets and deals in them with the sole purpose of raising capital for A.

Question 8.20: What about arrangements that do not cause a deal?

Arranging (bringing about) deals in qualifying cryptoassets applies only where the arrangements bring about or would bring about a particular transaction in qualifying cryptoassets. A person will bring about a transaction only if their involvement in the chain of events leading to a transaction is of sufficient importance that, without that involvement, it would not take place.

This exclusion at article 9Z (Article 9Y exclusion: arrangements not causing a deal) of the Regulated Activities Order is not available for making arrangements with a view to transactions in qualifying cryptoassets, which is a much broader activity.

Question 8.21: What about introducing a firm to an authorised person with a Part 4A permission to carry on regulated cryptoasset activities?

Arrangements that are solely arrangements under which persons will be introduced to an authorised person with a Part 4A permission to carry on regulated cryptoasset activities are excluded from the activity of making arrangements with a view to transactions in qualifying cryptoassets.

Making arrangements with a view to transactions in qualifying cryptoassets applies to ongoing arrangements made with a view to transactions taking place from time to time as a result of persons having taken part in the arrangements. It does not include one-off introductions or introductions that are not part of an ongoing pre-existing arrangement between introducer and client.

In the FCA’s view, this means that any arrangements which go beyond a sole introduction to an authorised person could be captured as arrangements with a view to transactions.

Question 8.22: What about simply providing the means by which the parties to a transaction are able to communicate with each other?

Merely providing the means by which one party to a transaction, or potential transaction, is able to communicate with other such parties is excluded from making arrangements with a view to transactions in qualifying cryptoassets.

In the FCA’s view, the crucial element of the exclusion is the inclusion of the word ‘merely’. This is aligned with the FCA’s approach to the article 27 exclusion in article 27 (Enabling parties to communicate) of the Regulated Activities Order of enabling parties to communicate for the activity of making arrangements with a view to transactions in investments, as set out in PERG 8.32. If a person makes arrangements that go beyond providing the means of communication, and adds value to what is provided, such that they are not merely providing the means by which the parties are able to communicate, they will lose the benefit of this exclusion.

As set out in PERG 8.32.3G to PERG 8.32.7G, where a publisher, broadcaster or internet website operator goes beyond what is necessary for them to provide their service of publishing, broadcasting or otherwise facilitating the issue of promotions, they may well bring themselves within the scope of making arrangements with a view to transactions in qualifying cryptoassets.

Similarly, examples of where, in the FCA’s view, a publisher or broadcaster is likely to be making arrangements within the meaning of making arrangements with a view to transactions in qualifying cryptoassets and unable to make use of the exclusion for mere communication include if:

(1) they enter into an agreement with a provider of investment services, such as a broker or product provider, for the purpose of carrying their financial promotion; and
(2) as part of the arrangements, the publisher or broadcaster does one or more of the following:
1. (a) brands the investment service or product in their name or joint name with the broker or product provider;
2. (b) endorses the service, or otherwise encourages readers or viewers to respond to the financial promotion;
3. (c) negotiates special rates for their readers or viewers if they take up the offer; and/or
4. (d) holds out the service as something they have arranged for the benefit of their readers or viewers.

Where a person receives commission or other form of reward based on the amount of regulated business done as a result of their carrying the financial promotion, this can also indicate that a person is making arrangements with a view to transactions in qualifying cryptoassets. However, the mere communication exclusion will apply in cases where there is such a reward, provided the arrangements are made merely to allow the communication to be made.

Other persons who may benefit from the exclusion because they are merely enabling parties to communicate include persons who provide the means for someone to communicate an order to another person. A person providing such services would not, in the FCA’s view, be merely facilitating communication (of the orders) if they provide added value as part of the arrangements. This added value could be in the form, for example, of such things as formatted screens, audit trails, checking completeness of orders, or matching orders or reconciling trades.

Features which are merely incidental to communicating information are less likely, of themselves, to prevent reliance on the exclusion. By contrast, functionality which assists users in identifying counterparties, locating trading opportunities, comparing execution options, formulating, routing, transmitting, monitoring or executing orders, or otherwise participating in the transaction process, is more likely to indicate that the service goes beyond merely facilitating communication.

In the FCA’s view, the concept of ‘added value’ should not be understood as meaning that any feature which makes a service more useful, convenient or attractive will prevent reliance on the exclusion. The relevant question is whether the person’s role remains limited to providing the means of communication, or whether the features of the service facilitate, support or enable the entering into of transactions in qualifying cryptoassets. For example, a person providing a service that enables parties to an actual or potential transaction to communicate with one another, but which is also designed to simplify trading by finding prices or venues, or by assisting clients in placing orders on those venues (including through order pre-fill functionality), is likely to be unable to rely on this exclusion.

Persons will also need to consider whether they are making financial promotions. See PERG 8.

Q8.23: What if the arranger is a party to the transaction?

Arranging transactions to which the arranger is a party is excluded from arranging deals in qualifying cryptoassets.

The main purpose of this exclusion is to ensure that a person is not regarded as arranging deals for another when the transaction in question is one to which they intend to be a party. As a result, a person cannot both be engaging in dealing in qualifying cryptoassets (as principal or agent) and arranging deals in qualifying cryptoassets for another as regards any particular qualifying cryptoasset transaction. Where the person is a party to the transaction, this is captured by the dealing activity (unless an exclusion applies).

Where a person is making arrangements with a view to transactions in qualifying cryptoassets with a view to a transaction they are entering in themselves, this will also be excluded from making arrangements with a view to transactions in qualifying cryptoassets.

Q8.24: What exclusions apply to trustees, nominees and personal representatives?

Arrangements made by a person acting as trustee, nominee or personal representative are excluded where these are with a view to a transaction between:

(1) that person and a fellow trustee, nominee or personal representative, acting in their capacity as such; or
(2) a beneficiary under the trust, will or intestacy.

A person will not benefit from this exclusion where they receive remuneration that is additional to any they receive for acting in the representative capacity (although a person is not to be regarded as receiving additional remuneration merely because their remuneration as trustee or representative is calculated by reference to time spent).