United Kingdom: FCA Securities Classification

The Financial Conduct Authority (FCA) — the UK’s financial regulatory authority — classifies digital assets into two main categories: regulated tokens and unregulated tokens.Security tokens are classified as regulated tokens, as they confer rights akin to traditional financial instruments (e.g., shares, debt instruments, or units in a collective investment scheme). As such, they fall within the scope of existing UK securities legislation and financial promotion rules.

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Key Compliance Requirements for Security Tokens in the UK:

• Must be issued and marketed in accordance with UK financial services regulations.

• May require approval or exemption under the Prospectus Regulation or Financial Services and Markets Act (FSMA).

• Issuers and distributors may need to be authorized or registered with the FCA.

• Investors must be provided with appropriate risk disclosures and offering documents, and may be restricted based on classification (e.g., retail vs. professional).

Issuers planning to offer security tokens in or from the UK must engage qualified legal counsel to ensure their structure, marketing, and offering terms comply with the FCA’s framework.

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