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FCA Survey Shows Significant Disapproval for Retail Derivatives Ban 


The United Kingdom’s Financial Conduct Authority (FCA) made a landmark decision earlier this week, banning the sales of crypto-based derivatives to retail traders. In light of the ban, many have expressed their displeasure. However, it appears that the agency knew this decision would upset fans and went ahead anyway.  

Sourcing for Opinions

The decision to ban retail crypto derivatives sales in the U.K. has been a long time coming. Prospects first surfaced in 2018, when the government’s Crypto asset Task Force called for the ban in light of newfound dangers stemming from exchange-traded notes (ETNs) and contracts for difference (CFD) – especially for retail traders.

The FCA eventually proposed the derivatives ban last year, explaining in a document that it planned to heed the Task Force’s recommendations. As the agency added in a separate policy document, the move could save retail investors between 267 million pounds ($338 million) to as much as 451 million pounds ($570 million) every year. 

Even at that, things were a tad murky. There were questions about how the ban would work and whether the British people would even go for it. To test public sentiment, the FCA conducted a survey, which it released earlier this week. As the survey report showed, even participants were significantly disapproving of such a ban. 

In its survey, the FCA took responses from 527 participants across retail customers, trade organizations, crypto firms, and national competent authorities (NCAs) within the European Union. As the results showed, 7 percent of respondents opposed the FCA’s proposed bans. 

The majority of these detractors had argued that digital assets had intrinsic value. Since they could act as payment instruments, they could be valuable to retail traders. They also pointed out that the ban would be disproportionate, and that retail customers could easily assess cryptocurrencies’ inherent risks on their own. 

While they understood the FCA’s desire to ensure customer protection, they urged it to try some other regulatory approach asides an outright ban. 

So Much for the Survey 

Despite the pleas, the CA moved ahead with the ban. The agency announced in a press release earlier this week that it had consulted with other bodies over these assets’ use for retail customers and had concluded that they were indeed dangerous. 

As for why it was banning the assets, the FCA explained that digital assets have no reliable valuation basis. It added that their prices are volatile and that they are susceptible to criminal activity. As such, any company offering these derivatives will have till January 6, 2021, to desist from the activity or risk being classified as a fraudulent organization.

It’s unclear whether the consultation the agency was referring to was the same one that didn’t favor the ban. If it indeed was, it begs the question of why the agency moved forward with the procedure. 

For Townsend Lansing, the Head of Product at U.K. crypto derivatives provider CoinShares, it all boils down to disapproval of crypto in general. Speaking with Cointelegraph, Lansing explained that the move was disappointing and would only drive retail investors to unregulated markets.

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