UK FCA proposes ban on cryptocurrency-linked financial instruments! The Financial Conduct Authority (FCA) has proposed the ban, warning that such products could cause huge losses for retail consumers, as they are unlikely to understand the risks or values.
The FCA said that products such as derivatives and exchange-traded notes (ETNs) that are linked to crypto or are described as crypto-assets were “ill-suited” to small investors.
One of the reasons? Extreme volatility. Other reasons include the difficulty in valuing a cryptocurrency, consumers’ very limited understanding of what they were buying, and the increased risk of financial crime.
Investors might “suffer harm from sudden and unexpected losses if they invest in these products”, the FCA said. The FCA also said that the ban would benefit consumers roughly 75 to 234.3 million pounds a year.
The FCA ban would affect other financial products such as contracts for difference (CFDs), options, futures, and exchange traded notes.
Christopher Woolard, the executive director of strategy and competition at the FCA, said to the Guardian: “As with our work on the wider CFD and binary optioins markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets. Most consumers cannot reliably value derivatives based on unregulated crypto-assets. Prices are extremely volatile and as we have seen globally, financial crime in crypto-asset markets can lead to sudden and unexpected losses. It is therefore clear to us that these derivatives and exchange traded notes are unsuitable investments for retail consumers.”
Woolard has also indicated that Facebook’s Libra cryptocurrency, due to launch next year, will receive intense scrutiny from regulators.
Bitcoin has seen a recent rally from its consolidating in the 3-4k USD range. There are people on both sides of the market, bulls and bears, calling for 20k or back down to as low as 3k. In late 2017, it reached nearly $20,000 per bitcoin before the 2018 crypto winter took the bulls down and delighted bears.
What do you think? Do you think that Crypto products are inherently dangerous for retail consumers? Are you a Brit? Let us know what your plan is on our Facebook page!
