LONDON - Britain's markets watchdog will publish a review of cryptocurrenciesin the third quarter following its latest warning to the sector last week.

Cryptocurrencies such as bitcoin have seen sharp swings in value, triggering concern among regulators.

The Financial Conduct Authority (FCA) said in its business plan for the coming financial year thatcryptocurrencies themselves don't come under its regulatory remit, but the use of them does.

"We will work with the Bank of England and the Treasury as part of a taskforce to develop thinking and publish a discussion paper later this year outlining our policy thinking on cryptocurrencies," the FCA said in the plan published on Monday.

Regulators and central bankers across the world have warned retail investors about the pitfalls of investing in cryptocurrencies, saying they could lose all their money.

On Friday, the FCA said firms offering services linked to cryptocurrency derivatives must meet all relevant rules in the regulator's handbook or could face sanctions.

The business plan set out several areas the watchdog will study in coming months, though it cautioned resources would be stretched by having to deal with the implications on the financial sector of Britain's withdrawal from the European Union next year.

"We recognise that this year we need to dedicate a significant amount of resource to withdrawal from the EU," FCA Chief Executive Andrew Bailey said.

"As a result, setting our priorities this year has involved a particularly rigorous level of scrutiny and challenge to focus on areas where we see the greatest potential for harm." (Reporting by Huw Jones; Editing by Mark Potter)

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