FCA to ban cryptocurrency derivatives for retail consumers in January 2021


The cryptocurrency sector suffered another severe blow when the UK's Financial Conduct Authority (FCA) announced that it would ban crypto derivatives. The regulatory agency plans to ban all sales of derivatives and exchange-traded notes (ETNs) with respect to digital crypto assets for retail consumers.

The unexpected announcement was posted at noon today on the FCA's official website, where the agency explained the motivation behind the ban. Given that this is the third time in October that regulatory agencies have put pressure on the sector, it is highly likely that there will be a coordinated 'attack' this quarter around the world.

We remind readers that BitMEX It was the first crypto derivatives exchange to be affected this month, as the CFTC issued charges against the company on October 1.

Yesterday, a similar event led to the famous crypto figure John McAfee was arrested in Spain for tax fraud and activities related to cryptocurrencies. The Securities and Exchange Commission (SEC) charged him for making more than $ 23 million from ICO token advertising, consulting, and marketing. While this is a McAfee exclusive, the event may also set a precedent for other ICO advisors and marketers.

However, today's FCA ban has a much bigger impact on cryptocurrencies. According to the press release, the regulatory agency believes that crypto derivative products are "unsuitable" for retail consumers.

The FCA argues that products cannot be valued reliably due to their inherent nature, prevalent market abuse and financial crime, extreme volatility, inadequate understanding, and lack of a legitimate investment need for retail consumers to invest in these products.

Furthermore, these 'features' are claimed to cause consumers to suffer sudden or unexpected losses when investing in these products.

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To be perfectly concise, the FCA mentioned which assets fall under the new law and which category they form. According to the press release, "unregulated crypto transferable assets are tokens that are not specified investments or electronic money."

These include leading cryptocurrencies like Bitcoin, Ether, and Ripple. The regulatory agency reminds readers that this type of investment vehicle is not covered by UK law and will therefore be prohibited. However, certain companies that meet the requirements for regulated activity may be approved by the FCA.

It should be noted that the ban will result in retail consumers saving up to £ 53 million. Acting Executive Director of Strategy and Competition Sheldon Mills commented:

“This ban reflects how seriously we consider the potential harm to retail consumers of these products. Consumer protection is paramount here «.

Additionally, Mills said that retail consumers are at high risk of suffering losses when trading crypto derivatives.

According to him, there is significant price volatility and inherent difficulties in valuing cryptocurrencies reliably. However, the FCA seeks to establish the prohibition as a measure of protection for consumers. While the ban was announced today, it will only go into effect next year on January 6.

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