The UK Financial Conduct Authority (FCA) has officially prohibited the sale of crypto derivatives and exchange traded notes (ETNs) to retail consumers in the UK.
FCA Says Ban in the Interest of Retail Crypto Traders
The UK financial watchdog made this announcement in an official press release on Tuesday (October 6, 2020). According to the FCA, the marketing, sale, and distribution of derivatives and ETNs to retail investors are not permissible in the country.
The FCA backed up its decision for the ban with reasons which include volatility of cryptocurrencies, lack of valuation, and lack of proper understanding by retail consumers. Also, the UK regulatory body seeks to protect consumers, stating that investment in these products could cause big losses for retail crypto traders.
Back in October 2019, the FCA initially revealed that it was considering a blanket ban on the sale of crypto derivatives to small investors. The regulatory body was expected to make a final decision on the matter early 2020.
While the UK government stated that the FCA’s proposed ban was the business of the regulatory body, some stakeholders in the cryptocurrency industry asked the regulator to reconsider its proposed ban.
Today’s announcement reveals that the UK financial regulatory body has moved ahead with the ban. A statement from the publication reads:
“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here. Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection.”
Furthermore, the FCA believes that the latest development will benefit the targeted consumers, as they could save up to £53m following the ban. The ban is expected to be implemented on January 6, 2021.
Governments Still Wary of Cryptocurrency
While the FCA is prohibiting the sale of cryptocurrency derivatives to protect retail consumers, somewhere in the Middle East, officials are warning against cryptocurrency. In a report by local news outlet Times of Oman on October 6, the Central Bank of Oman (CBO) asked citizens to be wary of the nascent technology.
According to Oman’s apex bank, residents and citizens engaging in crypto-related activities were doing so at his/her risk. Like many other governments globally, Oman stated that crypto comes with risks such as volatility and use for illicit activities.
The CBO added that cryptocurrency was not regarded as money, while stating that no institution was given license to trade crypto assets in the country. India’s Tamil Nadu Police issued a similar warning earlier in 2020.