BlockChain & Cryptos | |
BlockChain & Cryptos | |
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Wednesday, July 03, 2019
/ 01:00PM / By
The FCA / Header Image Credit:
FCA & Hacker Noon
The Financial Conduct Authority (FCA) is proposing
rules to address harm to retail consumers from the sale of derivatives and exchange traded notes
(ETNs) referencing certain types of cryptoassets.
The FCA considers these products are ill-suited to retail consumers who
cannot reliably assess the value and risks of derivatives or ETNs that
reference certain cryptoassets (crypto-derivatives).
This is due to:
These features mean retail consumers might suffer harm from sudden and
unexpected losses if they invest in these products.
The FCA is therefore consulting on banning the sale, marketing and
distribution to all retail consumers of all derivatives (ie contract for
difference - CFDs, options and futures) and ETNs that reference unregulated
transferable cryptoassets by firms acting in, or from, the UK.
This consultation fulfils the FCA’s commitment in the UK Cryptoasset
Taskforce Final Report to explore a potential ban.
We estimate the potential benefit to retail consumers from banning these
products to be in a range from £75 million to £234.3 million a year.
Christopher Woolard, Executive Director of Strategy & Competition at
the FCA, said:
'As with our work on the wider CFD and binary options markets, we will
act when we see poor products being sold to retail consumers. These are complex
contracts built on top of complex assets.
Most consumers cannot reliably value derivatives based on unregulated
cryptoassets. Prices are extremely volatile and as we have seen globally,
financial crime in cryptoasset markets can lead to sudden and unexpected
losses. It is therefore clear to us that these derivatives and exchange traded
notes are unsuitable investments for retail consumers.'
This consultation follows Policy
Statement (PS19/18) published on 1
July 2019, which finalised rules restricting the sale of CFDs and CFD-like
options to retail clients. These include setting leverage limits of 2:1 on CFD
referencing cryptocurrencies.
In January 2019, the FCA also consulted on Guidance
on Cryptoassets (CP19/3) to clarify
what types of cryptoassets fall within our current regulatory perimeter, which
closed on 5 April 2019. The FCA expects to publish its final Guidance on
Cryptoassets later in the summer, and has reflected feedback to that
consultation in our proposals for crypto-derivatives.
The FCA has also issued consumer warnings to inform consumers about the
risks associated with direct and indirect investments in cryptoassets.
2.
UK Cryptoasset
Taskforce Final Report(link is external) was
published in October 2018.
3.
PS19/18:
Restricting contract for difference products sold to retail clients.
4.
CP19/3:
Guidance on Cryptoassets.
5.
Unregulated transferable
cryptoassets are tokens that are not specified investments or e-money, and can
be widely transferred, which includes well-known tokens such as Bitcoin, Ether
or Ripple.
6. Christopher Woolard, Executive Director of Strategy & Competition, FCA speech - ‘Regulating financial innovation – going behind the scenes’, Cambridge Centre for Alternative Finance Annual Conference, 2 July 2019.
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