Proposed Ban on Crypto-based derivatives to investors

The Financial Conduct Authority (FCA), British financial watch dog is proposing a potential ban on offering cryptocurrency-based derivatives products to retail consumers. 

FCA is focusing on the derivatives linked to crypto assets.

Considering their high volatility, The regulator's fears that retail investors may be harm from unexpected lost if they invest on these products.
Proposed Ban on Crypto-based derivatives to investors

The executive director of strategy and competition at the FCA Christopher Woolard stated that "Most consumers cannot reliably value derivatives based on unregulated crypto-assets," said Woolard. 

"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."

Estimating the loss consumers may accrue, The FCA estimates that a ban would save consumers between £75 million and £234 million per year by preventing fraud and unexpected losses and Woolard said that the FCA "will act when we see poor products being sold to retail consumers"

The regulator noted that the initiative follows their public commitment within the UK Cryptoasset Taskforce Final Report, which was published in July 2018, and updated in October 2018. 

The FCA emphasized that the new rules in the upcoming CP will replace the final regulation of crypto-based contracts for difference (CFDs).

In another public policy statement on restricting CFDs, the FCA considered CFDs “complex, leveraged derivatives” that are commonly offered to retail clients and represent excessive risk. 

The agency expects retail investors to save from 267 million British pounds ($338 million) to as much as 451 million pounds ($570 million) on an annual basis, following their restricting measures, the FCA wrote.

In late 2018, FCA executive director of strategy and competition Christopher Woolard hinted at a potential ban of crypto derivatives in his testimony at “The Regulation of Cryptocurrencies” event in London.

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