FCA proposes ban on sale of crypto-derivatives to retail consumers

The Financial Conduct Authority (FCA) has launched a consultation on its project to ban the sale of crypto-derivatives to retail consumers. It estimates the potential benefit to retail consumers from banning these products to be from £75 million to £ 234.3 million a year.

The FCA considers that retail consumers cannot assess the value and risks of derivatives and that they could suffer unexpected losses. This is based on the following issues highlighted in the paper:

  • nature of the underlying assets, which have no inherent value and so differ from other assets that have physical uses, promise future cash flows or are legally accepted as money;
  • presence of market abuse and financial crime (including cyber thefts from crypto-asset platforms) in the secondary market for crypto-assets;
  • extreme volatility in crypto-asset prices;
  • inadequate understanding by retail consumers of crypto-assets and disparity between consumers’ expected return and the actual risk of loss.

The consultation covers the sale, marketing and distribution of all derivatives and exchange-traded notes (ETN) that reference unregulated transferable crypto-assets. It is particularly relevant for:

  • firms issuing or creating products referencing crypto-assets;
  • firms distributing products referencing crypto-assets, including brokers, investment platforms, and financial advisers;
  • firms marketing products referencing crypto-assets;
  • operators of trading venues and platforms;
  • retail consumers and consumer organisations.

The ban specifically targets contracts for difference (CFD) which are the main derivative products that reference crypto-assets in the UK. This consultation follows FCA’s Policy Statement which finalised rules restricting the sale of CFDs and CFD-like options to retail clients.

The FCA is asking for comments on this Consultation Paper by 3 October 2019.

  • Hugo Rousseau

    Hugo Rousseau

    Programme Manager | Financial Services and Payments
    T 020 7331 2054

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