Crypto Industry Participants Slam FCA Decision to Ban Retail Investors from Cryptoasset Derivatives

Earlier today, the UK Financial Conduct Authority (FCA) issued a ban on cryptoasset derivative products for retail investors. The decision came after an extended consultation pertaining to the issue. The ban did not impact spot trading for cryptoassets like Bitcoin or Ethereum. The FCA outlined their justification on the bank, with Sheldon Mills, interim Executive Director of Strategy & Competition at the FCA, saying they have evidence of retail consumers being placed at a high risk of suffering losses from trading crypto-derivatives.

Following the announcement, multiple industry participants commented on the ban, slamming the FCA’s decision.

Lawrence Wintermeyer, the Executive co-chair of Global Digital Finance, stated:

“I am surprised by today’s announcement from the FCA.  The regulator says part of its decision was influenced by a lack of consumer understanding around these products, but I am not convinced they are really any different to other similar alternative asset products that have not been banned for sale to the UK’s many sophisticated retail investors.  Also, the industry has appropriateness and suitability tests to assess whether they are right for individual retail investors interested in using them. I also disagree with the regulator’s view that there is no legitimate investment purpose for cryptoasset derivatives. In the same way that you may hedge against a position in fiat currency, one may wish to hedge against exposure to cryptoassets. This ban kills off what could have been a new investment opportunity for sophisticated retail investors.  It also sends a negative signal regarding the UK’s stance on cryptoassets.”

Don Guo, CEO of Broctagon Fintech Group, said the FCA has delivered a significant blow to UK investor freedom.

“Through banning the trading of crypto derivatives, we can expect UK trading space to move elsewhere. The demand for these securities continues to rise, with crypto derivative volumes reaching new highs this summer. It’s a lost opportunity for the UK. We certainly believe there should be measures to protect consumers, but this move disregards the rising demand among retail consumers to participate in the cryptocurrency space. Aside from the growing investor appetite, which is largely due to market volatility, traders are able to avoid the hassle of owning the assets and storing them in wallets. Instead, we believe that the FCA’s so-called ‘consumer protection’ measures should be focus on weeding out existing scam companies and prioritising consumer education, rather than crippling investment opportunities and withdrawing from an area of growing importance in the financial markets.”

Lavan Thasarathakumar, head of regulatory at Global Digital Finance, added his voice to the decision:

“The FCA’s move is quite a drastic one, and I wonder whether alternative options such as implementing leverage limits were sufficiently explored.  It seems as though cryptoassets have been unfairly singled out here when compared to other alternative investment aimed at retail investors.”

If you have an opinion on the FCA’s decision please email [email protected] us and let us know or comment below.

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