UK's financial watchdog proposes to ban crypto derivatives for retail investors

U.K.’s financial watchdog, the Financial Conduct Authority (FCA), has announced today that it is proposing to ban the sale of cryptocurrency derivatives and exchange-traded notes (ETNs) to retail investors.

The FCA said it thinks these products are “ill-suited” to retail consumers due to their “extreme volatility.” The products’ underlying assets having “no reliable basis for valuation,” cyber theft and lack of sufficient understanding among retail investors are some other reasons, the regulator said. 

These features could harm users from “sudden and unexpected losses,” and therefore, it is consulting on banning the sale, marketing and distribution of all derivatives, including contracts for difference or CFDs, options and futures, as well as ETNs, to all retail consumers.

Christopher Woolard, executive director of strategy & competition at the FCA, said:

“As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets.”

The FCA was mulling to prohibit the sale of certain crypto derivatives to retail investors since March of this year, and today it has officially proposed the ban.