UK’s FCA Might Ban Sale Of Cryptocurrency Contracts-For-Difference (CFDs) To Retail Investors


Christopher Woolard, the FCA’s executive director of strategy and competition reported that British regulators are considering banning cryptocurrency-contracts-for-difference sales to retail investors.

Woolard made such a statement during a speech at the FCA’s Cryptoassets Taskforce. The taskforce has categorized cryptocurrencies into three groups: utility tokens, exchange tokens, and security tokens. Exchange tokens include cryptocurrencies like litecoin and bitcoin. These types of tokens are not supported by a banking entity and they do not function as a security. Essentially, they are a method of exchange.

On the other hand, security tokens are currencies that have a private holder that has an interest in a an entity. These could be securities, depending upon what authority one asks. The final category, utility tokens, are similar to cryptocurrencies that can be exchanged for access to products or services.

Woolard then moved on to discuss the risks identified by the Cryptoasset taskforce in relation to the crypto marketplace. He stated that some of the most significant risks include scams, poor service providers, and complex products. He also noted that there are unclear practices that reduce market integrity, the most significant being fraud and money laundering.

He continued that regulators are looking to provide more guidance by the end of the year so that entities can determine whether their activities fall under the purview of the FCA. Regulators will also determine whether their reach needs to be extended to activities that are not managed by existing regulators. Brokers were most concerned about the FCA’s consideration of banking cryptocurrency derivative sales.

He mentioned,

“We’re concerned that retail consumers are being sold complex, volatile and often leveraged derivates products based on exchange tokens with underlying market integrity issues.” Moreover, the FCA is considering to “undertake one of the most comprehensive responses to the use of cryptocurrency assets for illicit activities.”

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