FCA Ban on Crypto Derivatives Comes Into Force Today


The FCA ban on the sale of crypto derivatives and exchange-traded notes (ETNs) passed in October went into effect Wednesday.

January 06, 2020 | AtoZ Markets – The UK Financial Conduct Authority (FCA) has imposed a ban on the sale and distribution of cryptocurrency derivatives investment products for retail investors. The British watchdog announced the upcoming ban in October 2020. The decision comes into force today, January 6, 2021.

FCA considers cryptocurrency derivatives to be ill-suited for retail investors

FCA-licensed companies are now unable to sell, advertise or distribute cryptocurrency derivatives to retail investors. These include Exchange Traded Numbers based on digital assets. The agency previously mentioned that the ban would help retail investors save about $70 million.

Meanwhile, the community did not approve of this decision. The industry claims that this initiative will hit the cryptocurrency market in the country as investors start to go to offshore crypto exchanges that are not subject to the British regulator.

Commenting on the ban, Jason Brown, director of development at Komodo, said:

The British government approved the ban in October without coordinating with regulators in the US, Europe and elsewhere. Meanwhile, the cryptocurrency industry needs regulatory consistency the most. Retail investors should have the same opportunities as institutions. Cryptocurrency investors need to have access to educational resources and know that the market is volatile and fraught with risks, but they must make financial decisions themselves. The FCA ban will slow down the spread of blockchain technologies. “

Brokers stopped offering cryptocurrencies

Following the announcement of the ban, several brokers have removed cryptocurrency CFDs from their product line for UK retail investors. For instance, FXOpen is no longer offering cryptocurrency CFDs due to new regulatory requirements.

Authorities around the world are actively developing regulatory concepts for digital assets. In the United States, for example, it was proposed to require cryptocurrency exchanges to fully verify users who carry out transactions with cryptocurrencies for $3,000 or more.

“There is still a lot to be done to finalize the regulation. At the European level, proposals must be approved by Parliament, Commission and Council,” said Simon Polrot, President of ADAN.

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