The British Financial Market Authority FCA published a statement yesterday, Tuesday, concerning trading in cryptocurrencies. Specifically, it is about new rules in which the derivatives trading of cryptocurrencies for private investors in the United Kingdom of Great Britain and Northern Ireland is prohibited.
In this article, we will look at what reasons the British Financial Conducty Authority gives for the crypto-ban in derivatives trading.
FCA bans derivatives trading for cryptocurrencies
The basis of our article is a press release published by the FCA. The statement by the British supervisory authority already bears the self-explanatory name “FCA bans the sale of crypto derivatives for private investors”.
The supervisory authority gives clear reasons for the ban. This type of product is not suitable for the public. According to the FCA, products of this type cause damage to end customers.
Crypto derivatives are bad for retail customers because of the harm potential they bring with them.
More precisely, it is about a lack of transparency and criminal activities. According to the FCA, many private customers simply lack the necessary understanding to use such products. Due to the high price volatility of cryptocurrencies, this often results in the total loss of investors.
Sheldon Mills, who works in the lead at the FCA, is quoted as follows:
This ban shows how seriously we take the potential for damage from such products to private customers. Protecting investors is our top priority.
Effects of the ban on derivatives on cryptocurrencies
The ban should then take effect on January 6, 2021. From this point on, the crypto-ban will prohibit the “sale, marketing and distribution” of any derivatives in the derivatives sector. Furthermore, so-called exchange-traded notes, or ETNs for short, are affected.
The FCA also mentions an interesting figure in its report: private investors are supposed to save or not lose £ 53 million through the ban and thus the „elimination of the danger“.
What is your opinion on a ban on derivatives for cryptocurrencies? Do you believe in the maturity of every individual or do you consider interventions by the supervisory authority to be useful to protect private customers?