Earlier this month, the UK Financial Conduct Authority (FCA) announced a ban on the sale of crypto derivatives and exchange-traded notes (ETNs) that reference cryptoassets for retail investors. The ban is scheduled to go into effect on January 6, 2021.
Today, industry association Global Digital Finance (GDF) is hammering the decision, calling it a setback for the UK in a widely distributed missive.
GDF is an industry membership body that promotes the adoption of best practices for cryptoassets and digital finance technologies through the development of conduct standards in a shared engagement forum with market participants, policymakers, and regulators. GDF reports that over 100 global organizations are members with more than 350 industry professionals from around the world having worked on developing the GDF codes of conduct.
GDF says the FCA’s ban will undermine the UK’s dominant position as a global Fintech hub. The group adds that many in the cryptoasset sector are questioning the regulator’s willingness to collaborate with them and listen to the views of key market participants.
The UK has long been known as a hotbed of Fintech innovation. This was largely accomplished by the fact the FCA was willing to collaborate with entrepreneurs in the financial services sector. Recently, administrative changes at the FCA may have curtailed the openness to change. GDF notes that other jurisdictions, including Europe, the US, and Asia have not taken such a definitive move.
Lavan Thasarathakumar, head of regulatory affairs at Global Digital Finance, commented:
“The 2,681 participants in the FCA’s own survey offer firm evidence that its policy statement to ban the sale of certain cryptocurrency related products is perhaps misguided and leaves one wondering why the FCA disregarded its own evidence-based foundation.”
He added that the 2019 consultation seeking industry input indicated that 97% of respondents disagreed on the FCA’s proposed ban.
A former director at the U.S. CFTC and GDF Board Member Jeffrey Bandman contrasted the FCA’s approach to that in the US:
“Other regulators, notably the U.S. CFTC, has been safely overseeing regulated crypto derivatives markets for nearly three years with products that offer a reliable basis for valuation. These markets are accessible to retail as well as professional investors. Given the strong ties and coordination among global agencies, it is surprising a forward-looking regulator such as the FCA did not find itself able to adapt these safeguards to the U.K. market.”
Lawrence Wintermeyer, Executive co-chair of Global Digital Finance, added:
“In stark contrast to other global regulatory trends with cryptoassets, the FCA’s ban puts the U.K. out on its own in terms of taking a prohibitive stance. This is an unfortunate move following the U.K Government’s snub to fintech companies by initially excluding them from its Coronavirus Business Interruption Loans Scheme (CBILS administration scheme). This surprising exclusion damaged the Government’s credibility as a champion of fintech following more than a decade of promoting fintech competition as an antidote to the concentration risk of incumbent U.K. banks following the Financial Crisis. The FCA’s decision to ban the sale of certain investment products linked to cryptocurrencies is yet another setback for the UK in trying to strengthen its position as a leading market for fintech and the digital asset markets. Some may wish to argue the moot point that the FCA’s ban is good for retail customers, good for the financial services market, and good for the U.K. We would most certainly disagree with this. What is unarguable is that digital is global, and that digital finance is global. The effectiveness of jurisdictional bans of this nature is questionable in a world where customers can find the products and services they choose on the internet, wherever these products and services come from, and this choice often drives customers offshore.”
GDF claims the FCA is “ignoring its own research findings” as well as feedback from the consultation in making its decision.
The GDF board, executive, and global membership tell the FCA they have put themselves at the disposal of the regulator to engage in rational and frank discussions to stop this ban, allow U.K customers the right to make their own informed decisions, and help to restore the innovative and collaborative spirit for which this world-class regulator is known for.