The United Kingdom’s financial watchdog, The Financial Conduct Authority (FCA) is considering an outright ban on trading in all retail derivatives of cryptocurrency, including contracts for difference (CFDs), futures and options.
The proposition has been put forward by the newly-formed “Cryptoassets Taskforce,” an organization established by the UK government to force dramatic new regulations on virtual and digital assets in the country. The task force was concocted in March this year from various elements of the British economic sector, including the FCA, the Bank of England and the national Treasury. It was initially defined as a research body to report on the potential benefits of cryptocurrencies and assess whether any new regulations were required. Now, however, it appears to have taken on the responsibility of the crypto police force for the blockchain and fintech industries in the country, suggesting sweeping and potentially damaging new laws.
Derivatives open up cryptocurrency markets to a much greater segment of the public and make trade in digital assets possible for those who may otherwise not have access. They do, however, expose inexperienced investors to higher risks, which has led the FCA to consider these extreme options in order to protect consumers. The use of leverage, in particular, has been a cause for concern as it poses a significant risk to the overall integrity of the market. Currently, the ESMA’s ‘restrictions on cryptocurrency CFD’s’ ensures a limit on the maximum leverage companies can offer.
The new rules will only come into place in early 2019, and until then, the task force plans to monitor the emerging cryptocurrency market further and reassess as necessary.
The FCA has previously issued warnings regarding trading in cryptocurrency CFD’s, citing lack of investor knowledge and regulation within the industry.