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FCA Sets In Motion Plans To Ban Retail Of Crypto Derivatives

The Financial Conduct Authority (FCA) in Britain has announced that they have put in motion plans to ban the sale of crypto derivatives to retail investors.

The FCA made this announcement through an official document which was released on the 1st of July. The document said that the regulatory body will be publishing a consultation paper (CP) which will state a potential ban on crypto derivatives such as Bitcoin and any other crypto related features that are available on the market.

According to the FCA, the ban comes after a public commitment which was made through the UK Cryptoasset Taksforce’s final report published on July 2018 and later updated in October of the same year. The new regulations being issued by the FCA will be a replacement of the regulations governing the crypto-based contracts for difference (CFDs).

Reading Behind Restrictions on CFDs and Ban On Crypto Derivatives

The FCA also released another public statement which stated their position on CFDs. The statement said that CFDs are complex, leveraged derivatives that are usually offered to retail clients while they are highly risky. According to the agency, they expect investors to save between £267 million and £451 million per annum through the regulatory measures that are being placed on CFDs.

The level of proper assessment of the risk that comes with these products, according to the FCA, is too difficult for the average person to attain. This is because the assets do not have a reliable basis through which they can be evaluated and they are highly volatile. The FCA also notes that there is a lack of sufficient knowledge among the general populace regarding cryptocurrencies and this leaves them vulnerable to losing their money on cryptocurrncy exchanges.

The restrictions on CFDs and the ban on crypto derivatives will have a profound effect on their trading and general value on the market. It is important to note that unlike a similar ban on CDFs which has been affected by the European Securities and Markets Authority (ESMA), the FCA’s ban is going to be permanent. The FCA’s ban also has a wider group of banned products as compared to the one by ESMA.

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      A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.