The UK's Financial Conduct Authority announced plans to block the sale of cryptocurrency derivatives to retail customers starting January 6, 2021. The regulator says the ban will prevent £53 million (
The UK's Financial Conduct Authority announced plans to block the sale of cryptocurrency derivatives to retail customers starting January 6, 2021. The regulator says the ban will prevent £53 million ($68.9 million) in annual losses.
The FCA believes crypto derivative products, including contracts for differences, options, futures, and exchange-traded notes, pose too much risk for nonprofessional investors. Both domestic and foreign firms operating in the UK cannot sell these products to retail customers under the new rules.
The regulator points to several problems. Cryptocurrency prices swing wildly, and there's no established method for valuing crypto assets. Most retail investors lack the knowledge needed to understand these products, the FCA argues, creating unnecessary exposure to loss.
The ban does not affect direct cryptocurrency trading. Since the FCA doesn't regulate Bitcoin or Ethereum purchases, investors can still buy those assets. But any firm offering crypto derivatives to UK retail customers after January 6 will be breaking the rules.
Sheldon Mills, the FCA's interim Executive Director of Strategy & Competition, defended the move. Extreme price swings in cryptocurrency markets and the difficulty of valuing crypto assets put retail investors at serious risk. Mills identified consumer protection as the central concern. "We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection," Mills said.
The regulator calculated the ban would save retail investors the £53 million they lose each year on these products.
The FCA warned investors to watch for scam operations. From January 6, any firm offering crypto derivatives to UK customers will be breaking the rules.
