The global industry group for exchanges, the World Federation of Exchanges (WFE) has asked the Financial Conduct Authority (FCA) not to ban crypto-derivatives to retail consumers.
As official announcement states, the WFE admits the volatility the FCA is concerned about, however, it highlights that an outright ban, under current proposals, would envelop regulated exchanges that operate "under stringent regulations to provide pre- and post-trade risk management standards which are designed to foster safe and efficient markets."
The WFE made the following recommendations to achieve consensus:
- That regulators give consideration to the underlying market structures; the structure of established, fully regulated exchange and CCP operators significantly diminishes the risk profile for retail investors participating in these markets.
- That there is caution in applying the same measures to exchange-traded and centrally cleared derivatives as to underlying crypto asset markets, as this could create unintended consequences.
- That options to mitigate excessive risk exposure for retail consumers should be pursued alongside the potential introduction of ‘standards’ for such products, particularly as the crypto market is evolving and maturing.
- A review on the ban (should it be implemented) as the market evolves for the purposes of ensuring consumer choice and access. This review is also designed to avoid international market fragmentation, particularly if international standard setters introduce a new global regulatory approach to the regulation of crypto assets.
The WFE CEO Nandini Sukumar claims consumer protection should be "foremost" when seeking new regulations.
"While crypto asset products have real potential, the market has suffered from unregulated providers distributing inappropriate products," Sukumar added.
The WFE brings together over 70 exchanges, including the Intercontinental Exchange (ICE), Nasdaq, Deutsche Börse, CME Group and London Stock Exchange Group.
Earlier this year, the British financial regulator reported that British investors lost about $34 million as a result of forex and cryptocurrency scams between 2018 and 2019.
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