FCA Bans Retail Cryptocurrency Derivatives in The United Kingdom


A landmark decision was issued on Tuesday by the Financial Conduct Authority (FCA) of the UK. The decision states that no companies in the country will be able to offer products relating to the cryptocurrency derivatives like exchange-traded notes (ETNs) and futures options to the retail customers.

Earlier, almost a year before this, the regulator FCA had first proposed to ban these products. After a year, FCA has released a statement where it claimed that the cryptocurrency derivatives are not suitable for the retail consumers as they pose immense harm.

The claims regarding the cryptocurrency derivatives are backed by several other reasons that come in detail and include concerns that they do not possess a reliable basis for the valuation. It is also subjected to abuse, along with financial crimes and is extremely volatile. 

Further motivations mentioned there include retail consumers’ incomplete understanding of the crypto assets including crypto derivatives and a claim that the retail investors have a deficiency in the “legitimate investment need” for all of these products. 

The ban will be effective from the 6th of January 2021. The regulator has warned:

“As the sale of derivatives and ETNs that reference certain types of crypto assets to retail consumers is now banned, any firm offering these services to retail consumers is likely to be a scam.”

FCA has said that this measure is effective in saving around £53m, which is $62.5 million for retail consumers due to avoiding trading losses.

“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.”

One of the companies that will be highly affected is CoinShares. The company had convinced FCA via a campaign to abandon its plans. The company offers various types of cryptocurrency derivatives products, including ETNs at the traditional markets.

“The government is great at setting up regulatory frameworks, not building products”, says Currency Comptroller Brian Brooks.

Source: Coin Telegraph

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