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UK’s FCA mulls banning crypto derivatives

Oct 30 2018
By
Jonathan Smith ,

 

The Financial Conduct Authority (FCA) considers banning altogether the sale of crypto derivatives such as CFDs on Bitcoin to retail clients, reveals the Cryptoasset Taskforce report published on Monday.  

 

This is a report on the UK’s policy and regulatory approach to crypto assets, drafted by the HM Treasury, the Bank of England and the FCA. Whilst the Taskforce Report recognizes that cryptoassets have the potential to bring benefits to markets, companies and retail investors, there are a number of different considerable risks associated with these financial products.

 

The latter include the risks of financial crime and cyber threats, the risks of losses for consumers, who may also be exposed to fraudulent activity, the risks to market integrity and financial stability, which may arise if the market grows and crypto-based derivatives are more widely used, and more.

 

In order to mitigate these risks, the Taskforce has committed to a number of actions, including consulting on a potential ban of the sale of derivatives referencing certain types of crypto assets (including CFDs, options, futures and transferable securities) to retail consumers.

 

The UK financial watchdog said that it would begin discussions in the first quarter of the next year on whether it would go ahead with the proposed ban on crypto assets. If the ban on the sale of CFDs on cryptocurrencies such as Bitcoin, Ethereum, Ripple, etc. comes into effect, this will surely affect the trading volumes of forex and CFD brokerages. Most of them have added such instruments to their product portfolio due to the increased demand by investors.

 

In fact, the FCA has warned investors of the risks of trading in cryptocurrency CFDs in November, 2017. Back then, the regulator outlined the high volatility of these assets, as well as the use of high leverage levels, as the main problem.

 

TAGS: FCA  UK  regulation  Bitcoin  CFD 
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