From today, the Financial Conduct Authority (FCA) is enforcing a ban on cryptocurrency trading for retail traders.
From today, no new crypto positions can be opened, and any existing crypto trades you hold will be made close-only. This means you cannot open new positions but can close or reduce the existing open positions.
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:
- inherent nature of the underlying assets, which have no reliable basis for valuation
- the prevalence of market abuse and financial crime in the secondary market for cryptoassets (eg cyber theft)
- extreme volatility in cryptoasset prices movements, and
- inadequate understanding by retail consumers of cryptoassets and the lack of a clear investment need for investment products referencing them
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.’