UK Regulators May Decide To Ban Cryptocurrency Derivatives

The financial regulators in the United Kingdom have made their last move in the crypto news and are now reportedly looking to outlaw cryptocurrency derivatives over perceived risks to retail investors. As we can see, UK regulators may soon decide to ban cryptocurrency derivatives – in a move which comes as the market continues to gain even more prominence against the traditional crypto spot trading.

Even though there are several financial watchdogs in different jurisdictions which have proposed stringent regulatory requirements for cryptocurrency derivatives trading, an outright ban would be a first move.

The UK regulators from the Financial Conduct Authority (FCA) consultations definitely fall in line with the recent trend of government authorities looking to exert greater oversight on the virtual currency market.

Meanwhile, reports from The Economist show that the FCA may be about to place a blanket ban on cryptocurrency derivatives. The UK regulators have reportedly finished a round of consultations and will provide their decision in 2020. Per the FCA, cryptocurrency derivatives present a series of regulatory problems that the base asset of cryptocurrencies – are recognized as currencies. Therefore, trading in their derivatives does not fulfill the requirements for hedging.

Usually, derivatives serve as temporary havens against sudden slumps in fiat currencies. It is the FCA’s argument that cryptos are not stable enough for their derivatives to fulfill this exact purpose. This is why UK regulators are in the latest cryptocurrency news for attempting to ban them.

Speaking to The Economist, Jacqui Hatfield argued about the reports of the FCA looking to ban cryptocurrency derivatives, stating:

“This is a knee-jerk reaction. Crypto-derivatives are just as risky as other derivatives.”

As previously reported on our site, UK regulators have long desired to ban trading in cryptocurrency derivatives. Ever since the start of 2019, the talk about tighter regulatory scrutiny has wlloed them to prohibit the market completely.

Meanwhile, the crypto derivatives market has been booming with talk of institutional interest in the arena. Several crypto behemoths such as Binance have made significant efforts to enter the market, providing greater competition for the likes of BitMEX.

What’s clear at this point is that UK regulators wish out to stamp out the derivatives market – but also bring robust governing laws for the entire crypto market.