UK's FCA looks to ban sales of crypto derivatives including CFDs and futures

In a speech delivered today, Christopher Woolard, the Executive Director of Strategy and Competition at the UK's Financial Conduct Authority (FCA), said that the FCA will consult on a prohibition of the sale to retail consumers of derivatives referencing certain types of cryptoassets including contracts-for-difference, options, futures and transferable securities.

Key quotes

  • The scale and pace of cryptoasset change - and what it might mean for consumers and markets - also requires vigilance from policymakers.
  • Whilst cryptoassets are not currently widely used in the UK, and the UK is not a major exchange market for cryptoasset trading relative to the global one, we are concerned about the potential harm posed by current usage of these often poorly-understood cryptoassets.
  • The taskforce has concluded that there are 3 major harms associated with cryptoassets.,
    • The first harm is to consumers, who may buy unsuitable products, face large losses, be exposed to fraudulent activity, struggle to access market services, or be exposed to the failings of service providers, such as exchanges.
    • Opaque practices and misconduct could damage confidence in wider market functioning.
    • We cannot overlook the risk of financial crime, where cryptoassets have been used as part of illicit activity such as money laundering and fraud.
  • We’re concerned that retail consumers are being sold complex, volatile and often leveraged derivatives products based on exchange tokens with underlying market integrity issues.
  • To combat financial crime risks, the Treasury will undertake one of the most comprehensive responses globally to the use of cryptoassets for illicit activities by applying and going further than the existing directive, the fifth EU Anti-Money Laundering Directive (5AMLD). 
  • The Treasury plan to complete further analysis on whether regulation could meaningfully and effectively address the risks posed by exchange tokens and what, if any, regulatory tools would be most appropriate.
    • HMT will consult in early 2019 on whether and how exchange tokens, as well as related actors such as exchanges and wallet providers, could be regulated effectively.
  • We will also seek to work collaboratively with international counterparts, including standard-setters and other national jurisdictions.

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