The UK Financial Conduct Authority (FCA) wants to impose a ban on crypto-related derivatives aimed at the retail investors according to the latest reports published by The Economist. The consultation about the question ended yesterday and the verdict will be available at the beginning of the next year as we are reading further in the blockchain news today.
According to the reports, the British financial regulator is extremely worried about the high amount of losses that retail investors suffered especially after betting on digital currencies like Bitcoin through futures options or the contracts for differences. More specifically, the Financial Conduct Authority estimated that the UK investors lost more than $492 million on crypto derivatives in the past 18 months through the end of 2018. To make things even worse, the exchanges that provide crypto derivative trading usually offer leverage options and they can multiply the potential losses by many times. The FCA hopes that the proposed ban will decrease the losses by up to 234 million pounds every year. There are some concerns that crypto derivatives ban from the UK regulator will send retail investors to unregulated cryptocurrencies which is even more dangerous. The partner of the UK-based law firm Orrick Jacqui Hatfield commented:
“This is a knee-jerk reaction. Crypto-derivatives are just as risky as other derivatives.”
Despite everything mentioned, the reports show that they are in favor of the FCA’s move by suggesting that it was the regulator’s duty to protect the consumers. The magazine pointed out that more than $1 billion in cryptocurrency was stolen from the crypto exchanges in 2018 and now that figure is even higher since the previous year. Overall, the consultation that The Economist refers to started at the beginning of July of this year when the FCA outlined its intention for the first time in a document discussing the restrictions on the CFDs as per the reports in the cryptocurrency news previously. The regulator also published a statement proposing a ban on the sale of crypto derivatives and there are four reasons why the retail investors should never even consider the crypto derivatives: their inherent nature of the underlying assets, the prevalence of market abuse and financial crime, high volatility in price movements and the inadequate understanding by retail consumers of crypto assets.
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