The British Financial Conduct Authority (FCA) prohibits the sale of cryptocurrency derivatives to retail investors, a move that says it will save target customers 53 million pounds ($68.9 million) in losses each year. The ban will take effect on January 6, 2021.

The regulator announced in a statement on October 6 that any local or foreign company operating in the UK is prohibited from selling, marketing and distributing any derivative products, including contracts for difference, options, futures and exchange-traded note (ETN) contracts. .

The authority said that derivatives based on digital assets (such as Bitcoin (BTC) or Ethereum (ETH)) are “not suitable for retail consumers because of the harm they pose.” FCA outlines a series of risks that such products may cause. These include the lack of a “reliable valuation basis” for underlying assets, market manipulation and “extreme” price fluctuations.

The report pointed out that retail customers lack “the necessary investment to make legal investments in these products” and that they do not yet fully understand derivatives transactions. The ban was first proposed in July 2019 and does not affect the trading of virtual currencies such as Bitcoin that are not regulated by the FCA.

Bloomberg reported that retail investors currently holding any such crypto derivatives will be allowed to keep them for as long as they want. Sheldon Mills, FCA’s Interim Executive Director of Strategy and Competition commented:

Huge price fluctuations and the inherent difficulty of reliably evaluating crypto assets make retail consumers extremely likely to suffer losses from trading cryptocurrency derivatives. We have plenty of evidence to prove this. The ban provides an appropriate level of protection.

The shares of companies offering prohibited derivatives fell in London trading on Tuesday. At the time of writing, CMC Markets plc is down 2.8%. Plus500 fell 2.1%, and IG Group Holdings fell 3.3%.

See also  Due to violation of COVID-19 rules, YouTube bans a US news network from posting new videos for a week

An executive at Coinshares, a British exchange that offers multiple cryptocurrency derivatives, criticized the FCA, saying that the ban “will not bring the proposed savings and benefits…will only drive British retail investors into unregulated cryptocurrency trading. So.”

The executive told news.Bitcoin.com via email: “We believe that the FCA ban is further evidence of the UK’s further abandonment of digital asset innovation and regulatory coordination with other jurisdictions.”

“We found that when the United Kingdom is the only Western country that bans the use of digital assets based on the false belief that there is no “intrinsic value”, it is difficult to see how the United Kingdom welcomes digital asset innovation.”

What do you think of the FCA cryptocurrency derivatives ban? Let us know in the comments section below.

Picture Credits: Shutterstock, Pixabay, Wiki Commons, FCA logo,

Disclaimer: This article is for reference only. It is not a direct offer or solicitation of an offer, nor is it a recommendation or endorsement of any product, service or company. Bitcoin.com does not provide investment, tax, legal or accounting advice. The company or the author shall not bear any direct or indirect responsibility for the use or reliance on any content, goods or services mentioned in this article or any loss or loss related to it.