The UK’s Financial Conduct Authority (FCA) has published a statement requiring businesses to seek authorization for dealing in cryptocurrency derivatives on its website Friday, April 6.

The statement clarifies that trading, transacting and advising on cryptocurrency derivatives is an activity which falls under the “Markets in Financial Instruments Directive II (MiFID 2),” which was introduced as a part of the EU’s Jan. 2018 financial reforms.

The FCA stipulates that although cryptocurrencies are not considered currencies or commodities that require regulation, derivatives referring to cryptocurrencies or ICO tokens are capable of being “financial instruments,” and thus fall within its regulatory perimeter.

The FCA includes 3 examples of crypto derivatives: futures, contracts for differences (CFDs), and options.

CFDs based on crypto-assets track the price of the underlying asset and allow investors to borrow money for their bets in order to chase high leverage returns. Importantly, they do not need to own any of the cryptocurrency itself.

In late March the European Securities and Markets Authority (ESMA) strengthened requirements for crypto-backed CFDs, citing the high price volatility of cryptocurrencies as its main concern.

The FCA’s position echoes that of another European regulator, the Autorité des marchés financiers (AMF), earlier this year, which likewise sought to clarify the definition of derivatives after online crypto trading platforms began offering binary options, CFDs, and Forex contracts.

Beyond Europe, Bitcoin futures are a popular derivative making inroads into the world of regulated finance, with banks such as Morgan Stanley and Goldman Sachs both clearing futures contracts for some clients after their launch on derivatives exchanges CME Group (Dec. 2017) and CBOE (Jan. 2018).