The FCA has finalized rules prohibiting the sale of derivatives and Exchange Traded Notes (ETNs) containing certain types of crypto assets to retail customers.
The FCA believes that these products are unsuitable for retail because they pose a hazard. These products cannot be reliably rated by retail customers because:
The inherent nature of the underlying assets, which means that they do not have a reliable basis for valuation
The proliferation of market abuse and financial crimes in the secondary market (such as cyber theft)
Extreme volatility in price movements in crypto assets
Retail customers don’t know enough about crypto assets
Retail customers do not have a legal investment requirement to legally invest in these products
These features mean that retail customers can experience sudden and accidental losses when investing in these products.
FCA Warns Against Unregulated Crypto Investment
Unregulated transferable crypto assets are not “designated investments” or tokens in electronic currency that can be traded, including well-known tokens such as Bitcoin, Ethereum or Ripple. The designated investment is the type of investment required by law. Companies that engage in certain types of regulated activities in connection with these investments must be approved by the FCA.
To address these dangers, the FCA has formulated regulations that prohibit the sale, marketing and distribution of derivatives (i.e. CFDs, CFDs, options and futures) and ETNs to all retail customers. These derivatives or traders are listed on the company’s unregulated, transferable crypto assets. , United Kingdom.
The FCA estimates that banning these products will save retail consumers around £ 53 million.
Sheldon Mills, Interim Executive Director of Strategy and Competition for the FCA, said: “This ban reflects the importance we attach to the potential harm in the product to retail consumers. Consumer protection is paramount here.”
“The high price volatility combined with the inherent difficulty of reliably valuing crypto assets means that retail customers are very likely to suffer losses from trading cryptocurrency derivatives. We have a lot of evidence to prove this. The ban offers an adequate level of protection.”
The ban will come into force on January 6, 2021. UK consumers should continue to beware of cryptocurrency derivative investment scams. Now that it is illegal to sell derivatives and ETNs that reference certain types of crypto assets to retail customers, any company offering these services to retail customers could be a scam.