UK's FCA proposes ban on crypto derivatives

The UK's financial markets regulator said it planned to ban the sale of derivatives based on crypto-assets to retail consumers.

The Financial Conduct Authority (FCA) said it considered the products “ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or exchange traded notes (ETNs) that reference certain cryptoassets”.

“We estimate the potential benefit to retail consumers from banning these products to be in a range from £75m - £234.3m a year,” the FCA said.

FCA executive director of strategy & competition Christopher Woolard said the products were “complex contracts built on top of complex assets”.

“Most consumers cannot reliably value derivatives based on unregulated cryptoassets.”

“Prices are extremely volatile and as we have seen globally, financial crime in cryptoasset markets can lead to sudden and unexpected losses. It is therefore clear to us that these derivatives and exchange traded notes are unsuitable investments for retail consumers.”

The FCA said the planned ban was due to the inherent nature of the underlying assets, “which have no reliable basis for valuation” and inadequate understanding by retail consumers of cryptoassets.

It said it would consult on banning the sale, marketing and distribution to all retail consumers of all derivatives (contract for difference, options and futures) and ETNs “that reference unregulated transferable cryptoassets by firms acting in, or from, the UK”.