Cryptocurrency Derivatives Could Face Ban by UK Financial Conduct Authority

According to the Financial Conduct Authority (FCA), cryptocurrencies are far too volatile and pose a risk to investors. With the surge in interest of digital assets as of late, the FCA is taking notice. It fears that many will be hurt and is taking the first step towards protecting consumers by banning cryptocurrency derivatives.

Ban on Cryptocurrency Derivatives Planned

The FCA believes cryptocurrency products to be “ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or exchange-traded notes (ETNs) that reference certain crypto-assets.” The agency also cites the “prevalence of market abuse and financial crimes” in the cryptocurrency secondary markets as a reason for the possible ban. Although the ban on cryptocurrency derivatives is intended to protect consumers, many traders are worried. Moreover, the ban could force these traders to seek riskier options for trading which could lead to more financial crime. There is some indication that the FCA may be shooting itself in the foot with this new measure since it’s unlikely traders will stop trading if the ban goes into effect.

Part of a Wider Regulatory Overhaul

The proposed ban comes at a time when the FCA is targetting all retail access to CFD markets. Last week, the FCA made permanent the EU ban on all types of CFDs to retail consumers. The ban is set to go into effect by the end of October which is also around the time the UK is expected to leave the European Union. Although many tech-savvy cryptocurrency investors will remain undeterred by the ban, it is a step back for the industry if adopted. With other major players like Facebook coming forward with their own cryptocurrencies, the FCA will likely take a more active look at the industry. Digital assets are expected to become a key focus of the FCA in the coming years. The question is, will the FCA change its ways and make the United Kingdom a cryptocurrency-friendly country or will it continue to clamp down on the sector? As of now, the FCA seems intent on doing the latter. Do you believe there is a possibility the FCA does not go through with this ban? Let us know your thoughts in the comments below.