On Wednesday, the United Kingdom’s Financial Conduct Authority decision to ban crypto futures and exchange-traded banknotes finally took effect.
The FCA initially announced the ban in October 2020 following one spend a year thinking about the matter. At the time, the FCA argued that crypto derivatives were not suitable for retail investors who were at risk of incurring significant losses.
Commenting on the decision when the ban went into effect Wednesday, Ian Taylor, chairman of the self-regulatory trading group CryptoUK, told Cointelegraph:
“The regulator is clearly focused on consumer protection, and rightly so. Derivatives provide leverage – allowing investors to increase their profits as well as their losses. The FCA has expressed concern that retail investors are exposed to significant losses and volatility, which they may not fully appreciate. “
Taylor, however, accused the FCA’s characterization of private investors in crypto derivatives as unaffected. The CryptoUK chairman also noted that the FCA could have opted for tighter leverage limits similar to the restrictions on contracts for differences, rather than imposing an outright ban.
With the ban in place, crypto derivatives can no longer be included in individual savings accounts, or ISAs and self-invested personal pensions, or SIPPs. However, there are concerns that the shift could lead investors to move towards unregulated offerings in other jurisdictions that pose even greater risks to retail investors than the products previously offered in the UK.
At the time of the first announcement of the ban, some critics of the decision pointed to potential negative consequences for UK crypto adoption. Simon Peters, a crypto analyst with the multi-asset investment platform eToro, dismissed these fears, telling Cointelegraph:
“In my experience with our UK clients with higher equity at eToro, most want to hold the actual crypto asset rather than trade a derivative like a CFD as they recognize the usefulness of holding the underlying crypto asset . “
Adoption of cryptocurrencies does indeed appear to be on the rise in the UK In June 2020, the FCA estimated that Cryptocurrency ownership among the adult population was 2.6 million. This crypto embrace is also shifting to the institutional side UK-based investment manager Ruffer recently converted 2.5% of his asset base to Bitcoin.