FCA bans sale of crypto-derivatives to retail investors
Ban to save consumers £53m per year
The Financial Conduct Authority (FCA) has banned the retail sale of crypto-derivatives, amid concerns about valuations, volatility and the prevalence of financial crime in the market.
Following a period of consultation the regulator determined that unregulated transferable cryptoassets of this kind have no inherent value and are poorly understood by retail investors, who have no "legitimate investment need" to access the products.
In July last year, the regulator began consulting on the ban and saw an overwhelming 97% of respondents oppose its proposals.
At the time it began consulting, the regulator estimated that the ban would save consumers up to £234m per year. It has since re-evaluated that figure to £53m.
Cryptoassets like Bitcoin have been in the regulatory spotlight for at least three years following bouts of extreme volatility, with the establishment of a UK Cryptoasset Taskforce, which already recommended the ban in 2018.
The FCA said retail consumers are liable to suffer harm from "sudden and unexpected losses" as a result of investing in these products.
It has therefore opted to make new rules banning the sale, marketing and distribution to all retail consumers of any derivatives or exchange-traded notes referencing unregulated transferable cryptoassets by firms acting in, or from, the UK.
The ban will come into effect on 6 January 2021.
Interim executive director of strategy and competition at the FCA Sheldon Mills said consumer protection is "paramount" to the regulator, and the ban "reflects how seriously we view the potential harm to retail consumers in these products".
He added: "Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives.
"We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection."
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