• UK regulator may prohibit cryptocurrency derivatives trading for retail investors
  • FCA considers leveraged derivatives as risky instruments.

The UK Financial Conduct Authority (FSA) is contemplating a ban on trading crypto-based derivatives such as contracts for difference, options and futures, the Financial Times reports.

The regulator considers these instruments to be too risky and will launch consultations in Q1 to sort this out. The ban is supposed to cover sales of derivatives based on digital assets will be prohibited for retail investors, which will be regarded as a major intervention in the market. 

Apart from that, the FCA published the report prepared by the Cryptoasset Taskforce, created in April to investigate the market vulnerabilities to fraud and manipulation as well as its influence on a broader economy. The Taskforce is made up of representatives from the FCA, the UK Treasury and the Bank of England.

The Taskforce believes that the derivatives are even riskier that cryptocurrencies themselves because investors' losses can exceed their initial deposit. 

The ban will become a serious blow for such online brokers as IG Group and Plus500 that experienced strong growth of revenues thanks to traders interest in crypto-related derivatives. 

Cryptocurrency derivatives fall within the scope of the FCA's powers because they are classified as financial instruments. Meanwhile, the regulation of other crypto assets remains unclear due to diverse use purposes and functions. Thus, some of them are considered as a medium of exchange, others are investments or capital raising tools.

Meanwhile, the FCA has expressed a critical attitude towards cryptocurrency assets, saying that they have no intrinsic value and pose threats to financial stability. The regulator has warned investors that they can lose all their capital.

“Given the complexity and new challenges presented to traditional forms of financial regulation, more time is needed to consider how regulation can meaningfully address the risks posed by exchange tokens, such as bitcoin,” the FCA said.

The regulator intends to launch a consultation early next year to figure out how to regulate cryptocurrencies and their trading infrastructures like crypto exchanges and crypto wallet providers.

Get 24/7 Crypto updates in our social media channels: Give us a follow at FXStreet Crypto Trading Telegram channel

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Cryptos feed

Latest Crypto News & Analysis

Editors’ Picks

Bitcoin will surpass gold by market value and cost over $500 000 in 9 years - Bobby Lee

One bitcoin will half a million dollars by 2028, according to Bobby Lee, the co-founder and the former CEO of China's lowest cryptocurrency exchange BTCC.

More Bitcoin News

Stellar (XLM) retreats from weekend high, stays in green on a day-to-day basis

Stellar (XLM) recovered from the recent low of $0.0683 to trade at $0.0815 on Sunday. By the time of writing, the coin has partially reversed the gains and settled act $0.0778; however, it still enjoys 3% of gains on a day-to-day basis. 

More Stellar Lumens News

Ethereum price analysis: ETH/USD sits in a long-term range

ETH/USD is trading at $186.57 at the time of writing, having retreated from the intraday high of $190.28. The second-largest digital asset with the current market value of $20.3 billion has lost 1.34% of its value since the beginning of Monday and stayed mostly unchanged on a day-to-day basis. 

More Ethereum News

Ripple price update: Reignited bearish momentum targets $0.27

Ripple continues to be depressed towards $0.27 (recent support). It is clear recovery towards $0.30 is nothing but a mirage based on the current technical picture.

More Ripple News


Bitcoin Weekly Forecast: Bulls wasted their chance

Bitcoin has been oscillating in a depressingly tight range since the beginning of November. Vanishing volatility makes it harder to engineer a decisive breakthrough from the range. 

Read the weekly forecast