In a recently published document, titled “Restricting contract for difference products sold to retail clients,” the FCA revealed that the regulator will soon publish a consultation paper (CP) on a potential ban on crypto derivatives. According to a
- inherent nature of the underlying assets, which have no reliable basis for valuation
- the prevalence of market abuse and financial crime in the secondary market for cryptoassets (eg cyber theft)
- extreme volatility in
cryptoassetprices movements, and
- inadequate understanding by retail investors of cryptoassets and the lack of a clear investment need for investment products referencing them
The FCA is, therefore, consulting on banning the sale, marketing, and distribution of these crypto-based financial instruments to all retail consumers. The FCA expects the potential benefit to retail consumers from the banning to be in a range from £75 million to £234.3 million a year.
FCA’s intention is welcome in view of the massive fraud that has taken place in recent years over Forex retail platforms in general and crypto-based financial products in particular.