The uk financial watchdog has set out rules for cannabis companies seeking to list on the london stock market, blocking recreational makers but opening the door to those providing products for medical use.

The uk legalised medicinal cannabis two years ago but the market for consumer use remains tightly regulated. flotations of export-focused companies seeking to tap into the growing market following legalisation around north america have been curtailed by uncertainty over listing rules.

On friday, the financial conduct authority set out guidance on how it will assess applications from cannabis-related businesses. uk-based medicinal cannabis companies and cannabis oil companies can list in the uk with the right home office licences, it said, but overseas companies face greater scrutiny.

Such companies need to convince the fca that they do not break uk law in effect, their overseas activities would be legal if carried out in the uk.

The fca said there remained a risk that the proceeds from overseas medicinal cannabis business may constitute criminal property in the uk including when the company possesses a licence issued by an overseas medicines or pharmaceuticals licensing authority. just because a company has a licence overseas does not mean it would receive one in the uk, it said.

Mgc pharmaceuticals, which is listed in australia, has said it is looking to float on the london stock exchange.

Weve been trying to list [in london] for more than a year and a half, said roby zomer, mgcs chief executive. it was frustrating because no one wanted to take a position on this and put all companies that had something to do with cannabis in one basket, he said, adding that he welcomed the fca finally taking a position on the matter.

Cannabis companies have worried about whether dividends and other income could be at risk, for example, if investors were found to be backing overseas operations deemed illegal in the uk.

The majority of listings for cannabis-related stocks have been in north america, where there was a rush in flotations, such as aphria and aurora, as rules around recreational use changed.

The decriminalisation of cannabis for medical use in 2018 in the uk did not result in a similar wave of listings. freyherr international and sativa group, both focused on medicinal cannabis products, have both listed in the past two years on the nex exchange.

Sativa has since merged with a canadian business, while uk-based gw pharmaceuticals which has a home office schedule 1 licence to manufacture cannabis-related medicine from a natural source left londons junior market in 2016 for a sole listing on nasdaq.brains bioceutical, the only other company with this type of uk licence, has sought to raise capital in north america, recently completing a $30m funding round.

Companies are still seeking to raise money in the uk, however. alphagreen a marketplace for cannabis-related products recently raised funds from venture capital investors.

Possessing and supplying cannabis for recreational use remains a criminal offence in the uk.