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Sale of Crypto-Derivatives in UK banned by FCA

The UK Financial Conduct Authority (FCA) has recently published a new set of rules that ban crypto derivatives to retail the customers in the country.

The regulator has decided to secure the consumers for over a year after the ban’s first proposal, thus elaborating that the cryptocurrency derivatives are “ill-suited” for the retail consumers, for they can pose a risk.

Top financial regulators banned retail crypto derivatives trading.

The UK’s leading financial regulator has published a landmark decision regarding the crypto industry; this effectively bans the sale of the derivatives and exchange-traded notes (ETNs) to the retail consumers.

From the official announcement published on the FCA’s website, the retail consumers can suffer risk from these products as it “cannot be reliably valued.” Without an inherent nature of the fundamental asset, there is no reliable basis for valuation, which has caused a swerve of other retail consumers’ problems, FCA elaborated in an announcement.

The FCA has cited the prevalence of market abuse and financial crime in the subordinate market as one of the significant reasons for instituting the ban. The extreme volatility in the cryptocurrency price movements and inadequate understanding of the cryptocurrencies were also listed as concerns that prompted the decision.

A significant highlight of the FCA’s decision is that the regulator sees no legitimate investment need” for the retail consumers to invest with the crypto derivative products, elaborating later that the harm from abrupt and unexpected losses outweighed any paybacks for the consumers.

The crypto derivatives industry took a vast blow from the FCA.

The interim executive director of strategy and competition at FCA, Sheldon Mills, said that the ban reflected how seriously the UK sees the potential harm to retail the consumers in the crypto derivative products.

“Consumer protection is paramount here,” he commented in the statement, further noting that the FCA had evidence of consumers distressing high losses on a significant scale. He elaborated that the ban provides an appropriate level of protection to them.

On the other hand, aside from the ban’s severity, the crypto derivatives industry will then have ample time to get ready for a new kind of UK market. The ban didn’t come into effect until Jan. 6, 2021, and it won’t affect the cryptocurrencies by themselves.

Bitcoin, Ether, XRP, and other coins will then be obtainable to trade the UK customers as the FCA views them as e-money and are therefore categorized as non-specific investments.

The ban on the crypto derivatives was first proposed almost precisely a year ago, which means that the regulator takes ample time to consider the decision. From an official statement, the FCA expected this to be a favorable decision in the long-run, thus estimating that the retail consumers may save around £53M or around $68M from the crypto derivative ban products.

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