The UK regulator, the Financial Conduct Authority, had decided to ban individual investors from speculating on cryptocurrencies such as Bitcoin. However, Analysts speculate that the effect this will have on the market at large will be little. Simply put: Industry executives and analysts alike think the market is too small to have an impact, among other things.
Expected Minimal Effect
Retail traders within the UK had been offered crypto derivative products by a select number of brokerages based within the country. Those brokerages could see a drop in revenue, but big exchanges such as Kraken speculate that the impact will be negligible. Actual cryptocurrencies can still be traded by individual traders of the UK, however. Alongside this, some traders will doubtlessly try to circumvent the rules, going to offshore exchanges to do their business.
The ban itself is scheduled to come into effect in January of next year. It should also be noted that professional investors don’t suffer from the same ban on crypto derivatives, due in part to their greater levels of understanding of the risks. Another critical factor is these traders’ ability to absorb potential losses being far greater than the typical retail trader.
Putting Traders At Greater Risk
Don Guo stands as the CEO of Broctagon Fintech Group, and highlighted the simple fact that those that want to trade in crypto derivatives would simply find some other way to open accounts in regions not affected by the ban. Guo further highlighted how this would cause retail traders to simply move to exchanges that aren’t regulated, which puts them at greater risk.
One of the saving graces is that few retail investors in the UK directly trade in crypto derivatives. This comes by way of Sui Chung, which is the CEO of CF Benchmarks. His firm provides various price indexes for various exchanges, such as CME Group of Chicago, US. Chung highlighted that usually, these retail traders go by way of contract for difference (CFD) providers.
Loss Of Less Than 1%
As for regulated exchanges and brokers being forced to close their derivative and exchange-traded note (ETN) offerings to retail traders, these range from CMC Markets, to Crypto Facilities (Owned by Kraken), as well as IG Index.
A spokesperson from Crypto Facilities made it clear that this will have a very small impact on the company at large, anticipating no material impact from the matter at large. As justification, the spokesperson highlighted how the UK derivatives market stands as a very small part of its global, diversified business, expecting a loss of less than 1% overall.