The FCA restricts the circulation of crypto-derivatives by banning their sale to retail customers

FCA measures include banning the sale, marketing and distribution of any derivatives and exchange traded notes with linkage to unregulated cryptoassets, citing “inherent nature of the underlying assets, which means they have no reliable basis for valuation” to justify them.

According to Sheldon Mills, interim Executive Director of Strategy and Competition at the FCA, this ban “reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.”

This “blow to the crypto world”, as Laith Khalaf of AJ Bell had it when inquired by the CITY A.M., was further explained by the FCA by extreme volatility in the cryptoassets market, the widespread financial crime in the secondary market and “inadequate understanding of cryptoassets by retail consumers”, so the regulator’s intention is to prevent retail customers’ sudden and unexpected losses.

Laith Khalaf elaborated further: “That’s perhaps to be expected, given those most likely to share their views were providers of crypto products with more than a little skin in the game.

“On balance, given how new these markets are, how instinctively appealing they can be to the younger generation and the potential for fraudsters and cowboys to muscle in on the act, it’s understandable the FCA wants to play it cautiously.

“Crypto fans will no doubt point to the huge financial distortions that have occurred in bond and currency markets as a result of quantitative easing, and question why cryptocurrency is being carved out for specialist treatment.

The measures will come into effect starting 6 January, 2021 and are estimated to save retail consumers circa £53 million.