A ban on the sale of cryptocurrency derivatives to retail investors in the U.K. has officially gone into effect. The ban was proposed by the Financial Conduct Authority (FCA) in October and became law on January 6 this year. The U.K.’s financial regulator FCA said that crypto derivatives weren’t suitable for retail customers because of the harm they pose. These customers can’t be able to accurately value the derivatives because of the prevalence of market manipulation, extreme volatility, inadequate understanding, and the inherent nature of digital assets, among other reasons, according to the financial regulator.
The crypto derivatives ban is now in effect.
According to the financial regulator, the crypto derivatives ban will save £53 million ($72 million) in losses to investors. This ban is now in effect. And while the FCA is convinced the ban will protect consumers, some crypto experts have disagreed. Many believe that the ban will only push crypto investors to unregulated platforms. The FCA has no authority over these platforms, which could lead to higher risks for the consumers, crypto experts believe. Dermot O’Riordan is one of those opposing the ban. Dermot is a partner at Eden Block, a venture capital firm investing in blockchain startups.
Crypto regulations still remain in a grey area.
Dermot O’Riordan noted, “It’s a shame because the only players that actually are regulated (or want to be) to offer crypto derivatives products to retail (Coinshares, Crypto Facilities, etc.) are generally good actors. The crypto derivatives ban will drive retail users to unregulated platforms like Deribit and BitMEX who will offer even less protection than the regulated players. So, it’s not clear how the average retail user wins in this scenario.” Several other countries are also trying to regulate the crypto industry, including the United States.
