FCA bans the sale of crypto-derivatives to retail consumers

gt94sss2

The FCA has published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets to retail consumers.

The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the: 

• inherent nature of the underlying assets, which means they have no reliable basis for valuation
• prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
• extreme volatility in cryptoasset price movements
• inadequate understanding of cryptoassets by retail consumers
• lack of legitimate investment need for retail consumers to invest in these products  

These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products. 

Unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as Bitcoin, Ether or Ripple. Specified investments are types of investment which are specified in legislation. Firms that carry out particular types of regulated activity in relation to those investments must be authorised by the FCA. 

To address these harms, the FCA has made rules banning the sale, marketing and distribution to all retail consumers of any derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.

https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers

John_

Seems to be a sensible move.

[Deleted User]

I have a friend who is into crypto but didn't understand it fully: This is to ban derivatives only. FCA is not banning Bitcoin and other cryptocurrencies. They just ban other financial products based on it. So there will be no Bitcoin ETF out of UK or CFD contracts from UK brokers. Bitcoin is unharmed by this, only derivatives brokers who won't have profits from these products - derivatives users won't be losing any profits as they never had any, as FCA nicely pointed out.

dunstonh

99% of consumers wont be bothered by it and the other 1% need the protection from themselves.