FCA bans the sale of crypto-derivatives to retail consumers

FCA ban crypto derivatives UK

Will a ban on crypto-derivatives product consumers or push the responsibility off-shore?

Today the FCA (as predicted) is introducing compliance oversight of crypto assets within the United Kingdom, a move welcomed by coinpass.com and the market in general. Over the last two years, the FCA has made several policy changes including rigorous registration procedures for UK providers, clarification on which crypto assets are investments, and are now also in the review of financial promotions offered from crypto-asset providers.

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

Over the last two years, the FCA has made several policy changes including rigorous registration procedures for UK providers, clarification on which crypto assets are regulated investments, and are now also reviewing financial promotions offered by crypto-asset providers. As of 6th January 2021, the FCA will introduce a new ban on the sale of derivatives and exchange-traded notes (ETNs) that reference certain types of crypto assets to retail consumers. Although the “ban” seems harsh to some market participants, it brings crypto assets in line with other specified investments currently within the FCA regime, and should therefore provide welcomed protection to retail consumers from trading a derivative of a product with significant price volatility. Derivative products are traditionally used by professional investors to access and gain leverage of financial instruments without having to hold or custody the underlying asset.

Crypto assets are digital in nature, easy to access and prone to significant price movements, hence derivative crypto assets in some respects are not suitable or even required by retail investors. The final crypto-asset arena within the UK (although not finalized) is making strides in the right direction with the introduction of KYT tools, trade associations, registration and a defined regulated set of rules, all of which can only bring legitimacy to the UK crypto asset market.