The UK’s ban on the sale of crypto derivatives goes into effect today
Following the announcement by the Financial Conduct Authority (FCA) in October 2020 to restrict sales of crypto derivatives to retail consumers, the ban went into effect as of today, January 6, 2021. What this means is that the CFDs, options, ETNs, and futures that reference cryptocurrencies can no longer be offered to retail investors in the UK. According to its previous press release, the FCA described crypto derivatives as “unsuitable for retail consumers because of the harm they pose. The agency gave several reasons why these types of offers should not be accessible to retail investors. On the one hand, they believe that cryptocurrencies “do not have a reliable basis for valuation.” This is in addition to extreme asset volatility and an alleged misunderstanding of crypto assets by retail consumers. Restrictions To take home its ban, the regulator claimed the restriction will save retail investors up to £ 53 million. But despite the perceived valid points that regulators may have given, industry commentators believe that no form of restriction or regulation could stop retail investors. Rather, such bottlenecks would only lead consumers to unregulated exchanges or abroad. Speaking on the matter, Eden Block’s Dermot O’Riordan criticized the FCA’s ban on crypto derivatives. He said: It’s a shame because the only players who are really (or want to be) regulated to offer retail crypto derivatives products (Coinshares, Crypto Facilities, etc.) are generally good players. This move will lead retail users to unregulated platforms like Deribit and BitMEX, which will offer even less protection than regulated players. So it’s unclear how the average retail user wins in this scenario. In response to the ban, some blockchain offerings are already boycotting UK residents.
