FCA Bans Bitcoin Derivative Trading in the UK

The Financial Conduct Authority (FCA) in the United Kingdom implemented a ban on the sale of cryptocurrency derivatives and exchange-traded notes (ETNs) to retail consumers. This decision was made to protect retail consumers from the potential harm these products could cause due to several factors:
 

• The inherent nature of the underlying assets, which means they have no reliable basis for valuation.

• The prevalence of market abuse and financial crime in the secondary market (e.g., cyber theft).

• The extreme volatility in cryptoasset price movements.

• The inadequate understanding of cryptoassets by retail consumers.

• The lack of legitimate investment need for retail consumers to invest in these products.

The FCA estimated that the ban would save retail consumers around £53 million from the potential losses associated with trading these products. The ban reflects the FCA’s commitment to consumer protection, acknowledging the significant risks posed by the volatility and valuation challenges of cryptoassets. Retail consumers were advised to be vigilant for crypto-derivative investment scams following the ban, as any firm offering these services to retail consumers is likely to be a scam.