The UK Financial Conduct Authority (FCA) has banned the sale of cryptocurrency derivatives to retail consumers. This was revealed in an announcement on the 6th of October.
According to the announcement, the FCA said crypto-derivatives products are ill-suited for retail consumers. Explaining further, the regulator added that these products could be harmful to the consumers. Some of the products include futures, options, and exchange-traded notes (ETNs).
The FCA highlighted more reasons for the ban. In the announcement, the regulator stated that the products have no reliable basis for valuation. In addition, the announcement said the crypto-derivatives are prone to market abuse or financial crimes such as cyber theft.
Also, the FCA mentioned that retail customers lack a proper understanding of crypto assets. Notably, the regulator also referred to the “lack of legitimate investment need” for the consumers to invest in cryptocurrency derivatives products.
Before the recent announcement, the FCA had proposed a ban on these products last year. At the time, CoinShares countered that the regulator did not have justifiable evidence to propose the ban.
The interim executive director of strategy and competition Sheldon Mills commented on the ban:
“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here….”
Now, the ban would come into effect on the 6th of January 2021. After then, the FCA said any firm that offers the banned products is likely to be a scam.
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