- The FCA has banned crypto derivatives and exchange-traded notes (ETN) for retail customers
- According to the FCA, the move is aimed at protecting retail investors
- The ban comes into effect 6th January 2021
- Bitcoin and the crypto-verse were briefly rattled by the news but BTC has continued to hold the $10,660 price area
Another global regulatory body has tightened its grip on crypto derivatives trading. Earlier today, the UK’s Financial Conduct Authority (FCA) announced that it has banned the sale of crypto-derivatives and exchange-traded notes (ETNs) to retail consumers.
According to the FCA, such products are ‘ill-suited for retail consumers due to the harm they pose’. The announcement by the FCA goes on to explain that consumers cannot reliably value them because of the following.
– inherent nature of the underlying assets, which means they have no reliable basis for valuation
– prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
– extreme volatility in cryptoasset price movements
– inadequate understanding of cryptoassets by retail consumers
– lack of legitimate investment need for retail consumers to invest in these products
Ban Will Come into Effect on 6th January 2021
The FCA went on to point out that retail consumers would save around £53 Million ($68.66 Million) from the ban of these derivatives products. The announcement of the ban comes less than a week after the US CFTC and the DoJ charged Bitmex with illegally operating a derivatives exchange and violating the Bank Secrecy Act.
Regarding a timeline for the implementation of the ban, the UK’s FCA provided January 6th, 2021, as the date when implementation will begin.
Bitcoin Holds $10,600 Amidst News of the Ban
When news broke of the FCA banning crypto derivatives trading for UK’s retail traders, the price of Bitcoin fell approximately $100 from $10,750 levels to $10,650. The King of Crypto is currently trading at $10,700 – Binance Rate – and continues to trade above the 100-day moving average.
With the US CFTC and the UK’s FCA setting the pace on regulating and/or banning crypto derivatives and trading platforms, it can loosely be concluded that other countries will in the near future, also provide similar recommendations regarding the same.
Additionally, such measures mean that these global regulatory bodies do not want to ban digital assets completely, but would rather regulate them as the future of investing evolves.