UK Regulator Bans the Sale of Crypto Derivatives to Retail Investors

The UK Financial Conduct Authority (FCA) has officially banned the sale of crypto derivatives and exchange-traded notes (ETN) to retail investors. The FCA said these products are "ill-suited" for retail investment. One of the reasons voiced is the high volatility of cryptocurrencies.

According to the regulator, there is no need for retail investors to invest in these products. Hacks, inadequate understanding and lack of a reliable basis for valuing cryptocurrencies are other reasons for the ban. According to Sheldon MILLS, executive director of strategy and competition at FCA, the ban reflects how seriously the regulator considers the potential risks to retail investment from these products. Customer protection is a primary concern.

The ban will come into force on January 6, 2021. The FCA estimates that retail investors will save around £53 mln from the ban on these products, which is roughly $68 mln. FCA's actions will affect not only crypto derivatives exchanges, but also brokers, investment platforms and financial advisors.

Image courtesy of Blackwell Global