By Simon Jessop and Emma Rumney
LONDON (Reuters) - Britain's financial watchdog said on Friday that firms offering services linked to cryptocurrency derivatives must meet all relevant rules in the regulator's handbook or could face sanctions.
The Financial Conduct Authority (FCA) does not currently regulate cryptocurrencies.
But it said that dealing or arranging transactions in, advising on or providing other services related to derivatives referencing cryptocurrencies or tokens issued through an initial coin offering (ICO), would likely require its authorisation.
This includes cryptocurrency futures, cryptocurrency contracts for differences (CFDs) and cryptocurrency options, it said.
The FCA warned consumers last September that ICOs were high risk and speculative.
Europe's top markets watchdog warned in November that new crypto coins could turn out to be worthless.
Demand for cryptocurrencies has pushed up prices for currencies such as bitcoin to a record high of more than $19,000 in 2017, before concerns that regulators may step in sent markets tumbling.
In March, financial policymakers from the world's 20 leading economies called on national regulators to monitor the development of crypto-assets and their risks, but stopped short of coordinated action due to a lack of consensus.
The FCA's move follows an announcement last month by finance minister Philip Hammond, who said Britain would set up a task force both to manage the risk around cryptoassets and exploit the underlying blockchain technology.
In its statement, the FCA said: "It is firms' responsibility to ensure that they have the appropriate authorisation and permission to carry on regulated activity."
"If your firm is not authorised by the FCA and is offering products or services requiring authorisation it is a criminal offence. Authorised firms offering these products without the appropriate permission may be subject to enforcement action."
Jake Green, regulation partner at law firm Ashurst, said: "To some degree this (FCA statement) clears up a small degree of academic uncertainty. Regardless, it must be the correct decision and shouldn’t come as a shock to many."