UK’s FCA Suspends Selling Of Crypto Derivatives By Imposing A Ban

The sale of crypto byproducts will be permanently suspended from the 6^th of January, 2021. The Financial Conduct Authority (FCA) of the United Kingdom has recently imposed a ban.

Due to the ban, the sale of crypto byproducts, commonly known as “crypto derivatives” have been permanently banned. As a result, no retail investors will be able to buy crypto derivatives. FCA has announced that the ban will be promulgated across UK on 6^th of January.

FCA is a conduct regulator of the UK that supervises all markets/firms relating to financial services operating within the country. The Authority works independently without interference from the UK Government.

FCA has informed that many retail investors have lost huge amounts of money in the name of “crypto derivatives”. Approximately GBP 53 million (equivalent to US$ 68.9 Million) is lost every year, the Authority informed. In order to eliminate the possibility of bearing loss by crypto retail investors, the ban has been imposed, told FCA.

The announcement was publicized on 6^th October wherein FCA informed that activities relating to sale, distribution, and marketing will be suspended. Similarly, the crypto byproducts relating to CFDs, ETNs, options, and futures have also been suspended under the ban. Directions have been issued to financial service markets and firms of the UK to ensure steps to comply with the ban.

The announcement further detailed that huge financial risks are associated with cryptocurrencies such as Bitcoin and Ethereum. Therefore, the retail consumers should refrain from investing in the derivatives based on the two digital currencies.

For a better understanding of retail investors and consumers, the potential risks have been outlined in issued directives of FCA. In particular, the “extreme volatility” offered in crypto derivatives is explained as being potentially highly risky.

A similar ban was earlier imposed by FCA in 2019. But it was not imposed on digital currencies such as Bitcoin even at that time. The reason being that digital currencies do not come under the regulatory framework of FCA.

News of the ban was covered by Bloomberg which reported that there is no ban on those who own crypto derivatives. They can possess them without any hindrance. However, they cannot sell, buy or distribute them after the imposition of the ban on 6^th January 2021.

A representative of the UK’s famous exchange, Coinshares, shared his thought. He said that how the UK will make progress in innovation when it will ignore the importance of such derivatives.