This is final. The UK Financial Regulator (FCA) has issued its decision and banned the sale of derivatives and ETNs on crypto-currencies. Individuals can no longer invest in these risky financial products.
This is bad news for players like CoinShares and its competitors. The Financial Conduct Authority, the regulator of financial services and markets, has decided to ban certain crypto investments from the UK.
From 6 January 2021, retail investors will no longer be able to subscribe to crypto-derivatives or exchange-traded notes (ETNs). The value of these investments is based on an index aggregating different crypto assets.
The extreme volatility of the crypto-assets in question is as follows
But for the FCA, these products are above all unsuitable for individuals because of the harm they do to consumers. The authority therefore believes that the value of these risky investments cannot be “reliably assessed”. »
Several factors are involved, considers the regulator. Firstly, the nature of the underlying assets. This does not provide a reliable basis for valuation. But the FCA also points to the “extreme volatility” of crypto-asset prices.
Moreover, this volatility is coupled with a misunderstanding by consumers about these assets. For private individuals, investing in these products therefore presents too great a risk of loss.
But the FCA is also very critical of the derivatives and ETN market itself. According to it, it is characterised by “the prevalence of market abuse” and “financial crime in the secondary market”.
A saving of €58 million for individuals
“These characteristics mean that retail consumers could suffer sudden and unexpected losses if they invest in these products,” says the UK authority, which is therefore imposing their next ban.
It estimates that the ban will save shoppers just over €58 million. This decision of the FCA implies for the crypto players the prohibition to sell, distribute or carry out marketing actions in favour of derivatives and ETNs.
“The high price volatility, combined with the difficulties inherent in the reliable valuation of crypto assets, puts consumers at a high risk of incurring losses when trading crypto derivatives. We have evidence that this is happening on a significant scale. The ban provides an appropriate level of protection,” concludes Sheldon Mills, Director of Strategy and Competition at the FCA.