Crypto assets players slam UK regulator’s ban on the sale of crypto derivatives to retail investors

By Staff Reporter

A previously announced ban by the UK’s Financial Conduct Authority on the sale of certain types of crypto-based financial derivatives for retail comes into effect in the UK will come as of January 6.

Meanwhile, Bitcoin and cryptocurrencies have been in the spotlight in recent weeks due to Bitcoin’s rally to all-time highs.

Crypto businesses interviewed by the Blockchain Asset Review lament the new rule and believes the new rule will discriminate against the retail investors and will also impact the development of blockchain industry.

“Retail investors generally should be able to have access to the same opportunities as institutions. Crypto investors should have the educational resources to know that this market is volatile and has risks, but they should also be empowered to make their own financial decisions. The UK FCA ban is a blow to blockchain adoption,” said Jason Brown, Director of Business Development at Komodo an open, composable smart chain platform.

He believes that when the ban was passed by the UK government in October, there was no coordination with officials in the US, EU, or any other regions around the world. What the blockchain industry needs the most is consistent regulations across jurisdictions.

The US CFTC has been regulating crypto derivatives markets that are available to both retail and professional investors for over three years. Just this past week there were renewed talks about an SEC filing for a US-based Bitcoin ETF for 2021. There are currently three European Bitcoin ETF issuers with listings on the Deutsche Borse Xetra exchange.

Gunnar Jaerv is COO of First Digital Trust, Asia’s leading digital asset custody provider and technology-driven financial institution said: “The UK ban on the sale of Crypto derivatives would mean that retail consumers would not be able to trade crypto assets meaning short selling of any crypto’s will not be allowed in the UK via platforms that offer Options, CFDs and Exchange Traded Notes (ETNs). However, this does not mean that the FCA has taken away the entirety of crypto trading as UK retailers will still be able to execute Spot trading (the crypto asset itself).

“The UK ban essentially means that retail traders will not be able to trade on margin for higher gains (or losses). This potentially would anger many retail traders as they would need to fork in more money than before to see significant gains in Spot buying and selling,” he said.

Dermot O’Riordan, Partner of Eden Block, a research-led European venture capital firm specialising in blockchain technology said: “By banning crypto derivatives, the FCA is basically indicating that they don’t know how to regulate this. The FCA has chosen to abdicate rather than lead.”

He believes it’s a “shame” because the only players that actually are regulated (or want to be) to offer crypto derivatives products to retail (Coinshares, Crypto Facilities, etc) are generally good actors. This move will drive retail users to unregulated platforms like Deribit and BitMEX who will offer even less protection than the regulated players. So, it’s not clear how the average retail user wins in this scenario.



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