Great Britain’s FCA Bans Retail Investors From Buying BTC Derivatives

Great Britain’s FCA, the top financial watchdog announced a ban on selling crypto derivatives to retail investors as we are reading more in our bitcoin news today.

Great Britain’s FCA ban prohibits the use of sale, distribution, marketing of financial derivatives for companies operating “in or from.” Bitcoin’s price action remained unmoved by the news and the ban will come into effect on January 6^th, 2021.

Non-event. Though it's funny how regulators try to "protect" people in the UK but allow for spread betting bucket shops.

No marketing to UK retail, but retail can still go to overseas-based platforms. https://t.co/FRQFG5RsR5

— Cantering Clark (@CanteringClark) October 6, 2020

The Financial Conduct Authority, the UK’s financial regulator banned the sale of crypto derivatives and exchange-traded notes to the retail investors. It will leave a grey area in the rule which will make it a non-event for BTC traders. The FCA cited market manipulation, security vulnerabilities, volatility, and inadequate understanding of the asset’s value proposition as the main reasons for the ban. Sheldon Mills who operates as the interim executive director of strategy at the FCA said:

 “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.”

The FCA indicated that the retail users will save 53 million euros from the ban and the rules are as follows:

 “The FCA has made rules banning the sale, marketing and distribution to all retail consumers of any derivatives (i.e. contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.”

The ban fails to address the use of overseas platforms but the omission left some to wonder about the effects of this ban. Edward Drake, the head of compliance and operations of eToro said:

 “The role of regulation is to protect consumers, which is what this latest ruling from the FCA is aiming to do. 84% of eToro UK client positions are in the real underlying asset with no leverage. As a result, we’re confident eToro will be less affected by the new legislation than many others in the market and that our clients will continue to enjoy uninterrupted access to crypto as real assets.”

Drake continued that the new regulations will serve as a wake-up call for consumers to “do their homework on what they are investing in and to be confident that they are investing in a regulated platform.” Derivatives exchanges account for the trading activity in crypto, surpassing the spot volumes by three to five times including the sale of perpetual swaps, options contracts, and futures. The FCA’s announcement came on the heels of the American authorities as the CFTC and Department of Justice charged BTC derivatives exchange BitMEX for violating financial regulations like the Bank Secrecy Act.