Market News

UK’s FCA warns of cryptocurrency CFDs risks

Nov 15 2017
By Jonathan Smith

UK’s financial markers and services providers regulator, the Financial Conduct Authority (FCA), has warned consumers of the risks of trading in cryptocurrency CFDs and noted they are “extremely high-risk, speculative products”.

The warning comes against the background of an increasing number of forex and CFD brokers offering this type of instruments, including some regulated by the FCA, such as IG, HYCM and XM.

The main risks outlined by the regulator include the high price volatility of the underlying assets such as bitcoin and ether. For example, the value of some cryptocurrencies recently fell by more than 30% in a single day.

Another risk is carried by the leverage. Unlike the cryptocurrency exchanges who offer leveraged trading with a relatively high margin requirement, some of the forex and CFD brokers offer leverage of up to 1:50. The leverage, however, is a two-edged knife and affects both profits and losses. Eventually a client can even end up owing money to the firm.

Furthermore, FCA notes that often charges on crypto CFDs are much higher than for other CFD products, as well the existence of wide variations between the pricing of cryptocurrencies and the risk of not receiving a fair and accurate price for the underlying cryptocurrency when trading.

In the past several months the forex and CFD brokers are falling all over themselves to offer various instruments with cryptocurrencies as underlying assets. Most offer CFDs, but there are some like eToro who offer cryptocurrency investment portfolios, while Swissquote teamed up with the cryptocurrency exchange Bitstamp to offer trading in bitcoin.

TAGS: fca uk cryptocurrency bitcoin cfd

Broker	Advantages
	FXTM a regulated forex broker (regulated by CySEC, FCA and FSC), offering ECN trading on MT4 an MT5 platforms. Traders can start trading with as little as $10 and take advantage of tight fixed and variable spreads, flexible leverage and swap-free accounts.


	XM is broker with great bonuses and promotions. Currently we are loving its $30 no deposit bonus and deposit bonus up to $5000. Add to this the fact that it’s EU-regulated and there’s nothing more you can ask for.
	FXCM is one of the biggest forex brokers in the world, licensed and regulated on four continents. FXCM wins our admirations with its over 200,000 active live accounts and daily trading volumes of over $10 billion.
	FxPro is a broker we are particularly keen on: it’s regulated in the UK, offers Metatrader 4 (MT4) and cTrader – where the spreads start at 0 pips, Level II Pricing and Full Market Depth. And the best part? With FxPro you get negative balance protection.
	FBS is a broker with cool marketing and promotions. It runs an loyalty program, offers a $100 no-deposit bonus for all new clients outside EU willing to try out its services, and an FBS MasterCard is also available for faster deposits and withdrawals.
	FxChoice is a IFSC regulated forex broker, serving clients from all over the world. It offers premium trading conditions, including high leverage, low spreads and no hedging, scalping and FIFO restrictions.
	HotForex is a EU Regulated broker, offering wide variety of trading accounts, including Auto, Social and Zero spread accounts. The minimum intial deposit for a Micro account is only $50 and is combined with 1000:1 leverage - one of the highest in the industry.
	Exness is a leading forex broker, offering MT4 and MT5 platforms. Traders can take advantage from a true ECN environment and trade on ultra tight spreads, starting from 0 pips.

Broker	Country	Regulation	Platform	Min Deposit	Review
	Cyprus, UK, Mauritius	CySec, FCA, FSC	MT4, MT5, Web	$10	Review Website
	Cyprus, SVG	CySEC	MT5, Web, cTrader	$100	Review Website
	Australia, Cyprus	ASIC, CySEC	MT4, MT5, IRESSTrader	$100	Review Website
	Cyprus, Australia	CySec, ASIC	MT4, MT5	$5	Review Website
	UK, Australia, South Africa	FCA, ASIC, FSCA	MT4, Trading Station, NinjaTrader	$50	Review Website
	UK, Cyprus, UAE, South Africa	FCA, CySEC, DFSA, FSB	MT4, MT5, FxPro Markets, cTrader	$100	Review Website
	Cyprus	CySEC	MT4, MT5, Web	$1	Review Website
	Belize	IFSC	MT4, MT5	$100	Review Website
	Cyprus, UK, South Africa, UAE	CySec, FCA, FSCA, DFSA	MT4, MT5, Web	$5	Review Website
	Cyprus, UK	CySEC, FCA	MT4, MT5	$1	Review Website
	UK	FCA	MT5	$5	Review Website
	UK	FCA	MT4, Web, MT4 for Mac	$100	Review Website
	Australia, UK	ASIC, FCA	MT4, MT5, cTrader	$200	Review Website

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