SWE FI Cryptoassets as Underlying Asset

On Feb. 22, SWE FI issued rules on cryptoassets as underlying assets.

  • SWE FI issued report following survey of the market for financial instruments with cryptocurrencies as the underlying asset, assessed lack of consumer protections.
  • SE FI said it is also difficult to value cryptocurrencies, and instruments are volatile.
  • Stated that this makes the products unsuitable for most, if not all, consumers.
  • Cryptocurrency Trading Risks
  • Trade is volatile, and it is associated with operational risks for market participants.
  • Additionally, there is a lack of regulation that adequately protects consumers.
  • SWE FI has warned of risks of so-called initial coin offerings (ICOs), a type of financing using cryptoassets, which are not normally covered by prospectus rules/requirements.
  • Risks also apply to financial instruments using cryptocurrencies as an underlying asset.
  • The instruments are volatile and difficult to value, and they are affected by the risks associated with the underlying assets, e.g. transparency of cryptocurrencies market.
  • Cryptocurrencies also common for money laundering and terrorist financing purposes.
  • Corporate Responsibility
  • Companies selling financial instruments with cryptocurrencies as an underlying asset must take into account the requirements for determining the target group that follow from the rules on product management and carry out an appropriate assessment.
  • Must also closely monitor development of the products to ensure, among other things, the established target group and the chosen distribution strategy are still appropriate.
  • Market abuse regulation applies to tracker certificates, other cryptoasset products.
  • Conclusions
  • SWE FI said financial instruments linked to cryptocurrencies are unsuitable for the vast majority of consumers, important for consumers to understand the risk involved.
  • Financial instruments linked to cryptocurrencies have been very volatile.
  • There is currently no valuation model that is widely accepted as reliable.
  • This makes it difficult/impossible to predict price development of financial instrument.
  • Consumers should only buy if they fully understand that all money can be lost.
  • And they should only buy when there are financial conditions for making a loss.
  • The consumer should not take for granted that the price development will be positive.
  • Next Steps
  • SWE FI will continue to follow the market closely, will consider interventions.
  • In addition, SWE FI will continue to engage in ongoing international work to ensure a high level of consumer protection and strong regulation of cryptocurrencies.

Regulators SWE FI
Entity Types B/D; Bank; CNSM; Corp; Depo; Exch; HF; IA; MSB
Reference Rp Nr 21, Dnr 21-3874, PR 2/22/2021; MAD/MAR, Dir 2014/57, Reg 596/2014; ESG; Fintech
Functions AML; Anti-Bribery; Compliance; Financial; Legal; Operations; Outsourcing; Privacy; Product; Research; Risk; Settlement; Technology; Trading
Countries Sweden
Products Banking; Clearing; Corporate; Cryptocurrency; Deposits; Derivatives; Futures; Issuance/IPO; Payments
Regions EMEA
Rule Type Guidance
Rule Date 2/22/2021
Effective Date 2/22/2021
Rule Id 98566
Linked to N/A
Reg. Last Update 2/22/2021
Report Section EU

Last substantive update on 02/22/2021