UK Financial Conduct Authority Proposes Ban on Sale of Crypto Derivatives to Retail Investors

• The FCA outlines rules to prohibit the sale of CFDs and ETNs
• The UK markets regulator cited no reliable basis for valuation of underlying assets as one of the reasons

The UK’s markets regulator, the Financial Conduct Authority (FCA) has proposed a ban on the sale of derivatives and exchange-traded notes (ETNs) related to a certain type of digital assets to retail customers.

This has been in line with the previous announcement made late last year when FCA was considering drastic measures in regard to CFDs on cryptos.

The FCA considers these products ill-suited to retail customers citing various reasons including inherent nature of underlying assets that have no reliable basis for valuation, the extreme volatility of crypto asset prices, the prevalence of financial crime in the secondary market, and inadequate understanding of digital assets by retail customers.

“We will shortly publish a CP on a potential ban on the sale to retail clients of derivatives and certain transferable securities that reference cryptoassets,”

wrote FCA in the document titled “Restricting contract for difference products sold to retail clients” published on July 1st.

The agency expects retail investors to save from about £267 million pounds ($338 million) to approximately £451 million pounds ($570 million) on an annual basis, following the ban of these products.

“As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets,”

said Christopher Woolard, the executive director of strategy & competition at the FCA.

Woodard previously warned Facebook’s social media that its plan for a new cryptocurrency called Libra will warrant intense scrutiny from regulators.

Earlier this year, FCA also consulted on guidance on crypto assets to clarify the type of digital assets that falls within its regulatory scope which closed in April 2019.

Later in the summer, the FCA expects to publish its final Guidance on Cryptoassets.