UK’s FCA Bans Retail Sale of Crypto Derivatives

The ban will come into effect on January 6, 2021.

The Financial Conduct Authority (FCA) has officially banned the sale of cryptocurrency derivatives and exchange-traded notes (ETNs) to all retail customers in the United Kingdom, the regulator announced on Tuesday.

“The FCA considers these products to be ill-suited for retail consumers due to the harm they pose,” the FCA stated.

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According to the financial markets regulator, these crypto instruments could not be reliably valued by retail investors due to the inherent nature of the underlying assets, market manipulation, and volatility.

The FCA also believes that retail investors lack the understanding of crypto assets. 

“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here,” Sheldon Mills, interim executive director of strategy & competition with the UK regulator, said.

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A Planned Ban on Crypto Derivatives

The ban is not abrupt as last year the FCA revealed its intentions to curb the exposure of such digital asset instruments to retail investors, citing similar drawbacks.

The latest order passed by the regulator has banned the sale, marketing, and distribution of any type of crypto derivatives, including contracts for difference, options, and futures, and ETNs for any domestic or overseas company operating in the UK.

The regulator estimates that retail investors will save around £53 due to the ban on these products.

“Significant price volatility, combined with the inherent difficulties of valuing crypto assets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection,” Mills added.

Meanwhile, BitMEX, one of the major crypto derivatives exchanges, is facing legal charges in the United States for illegally accepting US clients and a list of other violations.

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