“They’re not banning Bitcoin” — our take on the FCA’s UK Crypto-Derivatives Ban
Earlier today, the UK’s Financial Conduct Authority (FCA) issued a ban on the sale of crypto-derivatives and exchange traded notes (ETNs), including products like CFDs, options and futures, for retail customers.
Aiming to protect the consumer market, the new ban which comes into effect on 6 January 2021, will stop the sale, marketing and distribution of such products and help to reduce trading losses.
What’s CoinCorner’s take?
Our CEO and Co-Founder, Danny, shared his views on the update:
“First we need to make it clear that they’re banning products such as derivatives (CFDs, futures, etc) for retail offering, they’re not banning the sale or use of Bitcoin. For example, companies offering CFDs may offer leverage on a trade, meaning you can buy £1,000 worth of a Bitcoin CFD, but with 5x leverage you’re trading with the equivalent of £5,000. So, although the gains can be larger, the losses can be equally larger, making it a much higher risk.
“Recently the UK FCA introduced an option for Bitcoin and cryptocurrency companies to register with them as a first step towards forming a regulatory framework around such assets. They’re comfortable with these assets and seemingly have a pro stance, they’re just not comfortable with companies packaging them up in traditional trader focused products that the everyday person doesn’t understand, yet has easy access to via some services — hence the announcement today.
“From our understanding, this doesn’t affect Bitcoin exchanges like ourselves, but it will affect companies such as eToro that offer a CFD rather than the asset itself.”