It was decided by the Financial Conduct Authority (FCA) in the UK that exchange-traded notes and crypto futures will be banned in the country starting 2021. Following the announcement, the Financial Conduct Authority (FCA) from the United Kingdom has acted upon it just two days ago.
On Wednesday (January 6, 2021), the banning of the exchange-traded notes and cryptocurrency futures has been put in place by the FCA.
Initially, the announcement was made by the Financial Conduct Authority (FCA) regarding the ban back in October 2020. After the announcement and careful consideration, it was announced that the ban will be imposed in 2021.
At the time of consideration, the Financial Conduct Authority (FCA) argued that the cryptocurrency derivatives will not prove beneficial to the retail investors. It argued that by investing in exchange-traded notes and cryptocurrency futures, the retail investors would be at the risk of incurring losses.
After the implementation of the ruling, the entire cryptocurrency industry in the United Kingdom is extremely concerned. Some of the major crypto-entities from the UK cryptocurrency community have also expressed their displeasure around the recent developments.
Following the ban, the chair of CryptoUK (a self-regulatory trade group), Ian Taylor has released a statement. The statement released by Ian Taylor is rather neutral as it talks about the elements of gains vs the elements of losses of consumers.
Ian Taylor stated that with the ban, the Financial Conduct Authority (FCA) has shown that it is worried about the protection of the consumers. On one hand, the derivatives enable the investors to take leverage of the services and increase their profits/gains. On the other hand, it poses the same amount of risks for the investors as there are always chances of them incurring a loss.
When it comes to retail investors, the Financial Conduct Authority (FCA) is very much concerned and considerate. Although the ratio between profit and loss for the retail investors are partial, still the regulators are not ready to take any risks.
However, Taylor did state that the retail crypto derivatives investors’ characterization decided by the Financial Conduct Authority (FCA) is ingenious. The chair of CryptoUK stated that instead of putting a ban on derivatives, the regulators could have introduced stricter limits on leverage. To support his argument, he quoted the restrictions that have been imposed on the CFDs by the regulators.
Now that the ban has been imposed on cryptocurrency derivatives, the investors will be unable to store cryptocurrency derivatives into individual savings accounts (ISA). The same thing will be imposed on self-invested personal pensions (SIPPs).
The recent ban has given birth to another alarming situation, which is that the investors will now be shifting to platforms that are unregulated and pose even higher risks on investors’ investments.