The UK has banned the sale of derivative products such as Forward and Futures Contracts, Options and Swaps, the underlying assets of which are cryptocurrencies, to ordinary investors.
Britain’s financial regulator, the Financial Conduct Authority (FCA), has officially banned the sale of cryptocurrency derivatives to ordinary investors.
In the statement made on the official website of FCA, it was stated that these products are not suitable for individual investors due to the damages they cause. The institution listed the following reasons why these products are not suitable for individual investors:
There is no reliable valuation of the underlying asset
Prevalence of market abuse and financial crime in the secondary market
Excessive volatility in crypto asset price movements
Incomplete understanding of crypto assets by retail consumers
The lack of legitimate investment needs for retail consumers to invest in these products
“These features show that ordinary investors could suffer sudden and unexpected losses if they invest in these products,” FCA continued in the statement. used the expressions.
The agency also estimates that the ban will save approximately £ 53 million.
“This ban shows how seriously we take the potential damage to ordinary investors in these products,” said Sheldon Mills, FCA official. Consumer protection is very important here. Price volatility in crypto assets puts retail consumers at risk of suffering from trading in crypto derivatives. We have evidence on this. The ban provides the appropriate level of protection. ” said.
The ban will enter into force as of January 6, 2021.
What are the derivative products?
Financial products whose prices depend on the prices of the underlying asset and are used to hedge from risk or to increase returns by taking a certain level of risk.
Although there are hundreds of different types, mainly used derivative products; Forward and Futures Contracts are Options and Swaps.
The FCA’s decision came just days after the US Commodity Futures Trading Commission (CFTC) complained to the crypto derivatives giant BitMEX for not meeting the anti-money laundering procedures by operating an unregistered trading platform and know your customer. On the other hand, the US Department of Justice sued the founders of the exchange, Arthur Hayes, Ben Delo, and Samuel Reed. While Reed was arrested, no such step was taken for the other two names.
After this development in BitMEX, over $ 400 million Bitcoin was withdrawn from the exchange.