What does it mean for the UK to ban Bitcoin derivatives?


Britain’s decision to ban its derivatives with Bitcoin from ordinary investors had a great impact on the markets. What does this improvement mean?

The Financial Conduct Authority (FCA), the UK’s agency responsible for controlling the financial market, announced that the sale of derivatives, the underlying asset of which is cryptocurrencies, to ordinary investors is now prohibited.

As we have previously reported, the FCA had already proposed such a ban a year ago. After the passing of time, the decision was officially announced today.

First of all, it should be emphasized that this ban is not a Bitcoin or cryptocurrency ban, only the sale of financial contracts based on these assets to ordinary investors.

When it comes to derivative products, if it is necessary to make a definition, financial products whose value varies according to the changes in the value of an underlying asset and which are used to protect against risk from time to time and to increase returns by taking risks from time to time should come to mind.

Examples of derivative products are futures, options and swap contracts.

Recently, derivatives have become increasingly popular in the cryptocurrency markets. Many crypto money exchanges started to offer these products to their users. A while ago, when derivative products were mentioned in the field of crypto money, the first platform that came to mind was BitMEX, also described as the “crypto derivative giant”. In BitMEX, it is possible to buy and sell these contracts with a leverage of up to 100 times in many crypto currencies, especially Bitcoin.

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In March, FCA personally used the name of BitMEX and reported that this company was providing financial services and products in the UK without any authorization or approval. The institution warned users in the UK against BitMEX.

The FCA’s decision was welcomed by many. Economy Journalist Erkan Öz commented on the subject, “Good luck. I think it’s even positive. However, I do not know if we do not touch the classical markets where derivatives are the real harm for the small investor… How can you stop the decentralized derivatives exchanges fast anyway? When the Great Financial Flood is over, derivatives will be very narrow. ” said.

It is noteworthy that the FCA’s decision came a few days after the actions of the US Commodity Futures Transactions Commission (CFTC) and the Department of Justice (DOJ) against BitMEX. All these developments can be read as institutions taking action to regulate the cryptocurrency industry. It should not be surprising that similar decisions are made in many parts of the world in the coming months.

Finally, the Financial Action Task Force (FATF) affiliated with the G20 will most likely implement the Travel Rule in the cryptocurrency industry next year. For the latest on this topic: FATF rules are coming to the Bitcoin industry: Here’s everything you need to know


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