UK Bans Crypto Derivatives Sales to Retail Investors
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Oct. 6, 2020

The UK's Financial Conduct Authority (FCA) has banned the sale of crypto derivatives and exchange-traded notes (ETNs) to retail investors.

According to the document published by the FCA, the decision has been made after the research work carried out between July and October 2019. The new regulations will come into force on January 6, 2021. The FCA has written:

"We believe that retail consumers can’t reliably assess the value and risks of derivatives (contracts for difference, futures and options) and exchange traded notes (ETNs) that reference certain cryptoassets. We estimate a ban could reduce harm by £19m to £101m a year for retail investors."

The ban affects companies issuing crypto derivatives, their suppliers, including brokers, investment platforms and financial advisers, companies marketing these products, operators of trading venues and platforms, retail consumers and consumer organizations. The FCA has highlighted that non-regulated stakeholders must also comply with the regulations:

"There is growing evidence that cryptoassets are causing harm to consumers and markets. As a result, the UK Cryptoassets Taskforce, consisting of the Treasury, the FCA and the Bank of England, published a Final Report in October 2018 setting out the UK’s policy and regulatory approach to cryptoassets and made a number of commitments. It included a commitment to consult on a potential ban on the sale to retail consumers of derivatives that reference certain types of cryptoassets."

The FCA's director of strategy and competition, Sheldon Mills, said:

"The ban reflects how seriously we view the potential harm to retail consumers in these products."

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