Cryptocurrency Derivatives Series: FCA To Impose Blanket Ban on Retail Participation in Crypto-Derivatives Products

The UK’s financial regulator, ‘FCA’ (Financial Conduct Authority), has just notified a consultation on crypto asset derivatives products. It reckons that immature traders using the derivatives products may exposure about the risks associated with such newly invented instruments.

Hence, the FCA is contemplating a blanket ban on the retail investors trading the products. The final decision is expected in early 2020.

They recently finalised rules prohibiting as to how the CFDs and options are sold, marketed, and distributed to retail consumers.

And for now, FCA is likely to abstain the retail investors from trading Crypto Derivatives by imposing blanket ban.

Many traders lost billions of dollars on crypto derivatives in the yesteryear. The FCA’s proposed ban would aim at limiting these losses by excluding non-accredited investors from the risky products. It estimates that such a restriction could reduce the annual losses of crypto traders by as much as $290 million a year.

FCA has carried out work on crypto-assets, both as part of a broader UK Crypto-asset Taskforce and independently to achieve our objectives. This policy statement is the next step in the FCA’s work on crypto-assets and sets out details on where different types of crypto-assets might fall in the regulatory perimeter.

As there is growing instances of crypto-derivatives causing harm to the UK clients, the Government launched the crypto-assets Taskforce (‘the Taskforce’), consisting of HM Treasury, the FCA and the Bank of England in March 2018. The Taskforce’s final report (the ‘CATF Report‘) was published in October 2018. It set out the UK’s policy and regulatory approach to crypto-assets and made a number of commitments.

In October 2018, the Taskforce published the CATF Report outlining the UK’s policy and regulatory approach to crypto-assets and DLT. The Report assessed the risks and potential benefits of crypto-assets, identified potential harms, and detailed the different activities that should be assessed and considered for potential regulation. 

The CATF Report committed to:

• Mitigating the risks that crypto-assets pose to consumers and market integrity 
• preventing the use of crypto-assets for illicit activity by bringing relevant firms into anti-money laundering (AML) and counter-terrorist financing (CTF) regulation 
• guarding against potential, emerging threats to financial stability 
• encouraging responsible development of legitimate DLT and crypto-asset related activity in the UK.