New regulation and restriction are again part of today’s crypto news as the European Securities and Markets Authority announced their decision to restrict all crypto-based contracts for differences.
A contract for differences (CFD) is a contract between buyers and sellers where is predetermined that the difference between the present value of a certain asset and the future value of the asset at contract time will be compensated, if positive-by the seller, if negative- by the buyer.
According to the release of the agency, these restrictions will be improved starting November 1 because as the agency justified, significant investor protection.
Cointelegraph reported that before the restrictions, the leverage limit for CFDs was 5:1 but now it’s 2:1 so investors must own nearly half of the contract’s volume before opening it. Just as the year starter, ESMA issued a Call for Evidence where you can see that volatility of the crypto prices brings to investors doubting their protection.
ESMA stated back in March:
“Due to the specific characteristics of cryptocurrencies as an asset class the market for financial instruments providing exposure to cryptocurrencies, such as CFDs, will be closely monitored, and ESMA will assess whether stricter measures are required.’’
Lots of other EU regulators pay great attention to crypto investing and even warn customers that cryptocurrencies are extremely risky assets. Some, such as the European Supervisory Authorities urged crypto users that cryptocurrencies show clear signs of a bubble.
Despite that, EU countries are very keen on cryptocurrencies and try to find other ways to approach the derivatives. For example, Austria proposed a supervision over crypto derivatives using trading rules that are used for gold and France even prohibited crypto assets advertisement online.
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