UK regulator bans sale of crypto derivatives to retail users


The U.K.’s Financial Conduct Authority (FCA) has today officially banned the sale of cryptocurrency derivatives and exchange-traded notes to retail users, more than a year after first proposing such a ban.

The FCA said these products are “ill-suited” for retail consumers due to various reasons, including “extreme volatility” of cryptocurrencies. There is no legitimate investment need for retail consumers to invest in these products, said the regulator. Hacks, inadequate understanding, and cryptocurrencies’ “no reliable basis for valuation” are some other listed reasons for the ban.

“This ban reflects how seriously we view the potential harm to retail consumers in these products,” said Sheldon Mills, interim executive director of strategy and competition at the FCA. “Consumer protection is paramount here.”

The ban will come into effect on January 6, 2021. The FCA estimates that retail consumers will save around £53 million (~$68 million) from the ban on these products.

The FCA’s action will not only impact crypto derivative exchanges, but also crypto brokers, investment platforms, and financial advisers.

“If your firm carries out marketing, distribution or selling activities in, or from, the UK of the relevant products to retail clients, you are required to cease these activities by 6 January 2021,” said the FCA in a separate policy statement. “Retail consumers with existing holdings can remain invested following the prohibition, until they choose to disinvest. There is no time limit on this, and we do not require or expect firms to close out retail consumers’ positions unless consumers ask for this.”

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

UK regulator bans sale of crypto derivatives to retail users written by Yogita Khatri @ October 6, 2020 Yogita Khatri

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