Bitcoin (BTC), Cryptocurrency, News, Regulation

Financial Conduct Authority (FCA) Officially Bans Cryptocurrency Derivatives and ETNs

The financial regulator of the United Kingdom the Financial Conduct Authority (FCA) has imposed an official ban on Exchange Traded Notes (ETNs) and cryptocurrency derivatives. The British financial watchdog has banned the sale and distribution of ETNs and digital currency derivatives for retail customers, as per the official press release issued by the Financial Conduct Authority (FCA).

The UK’s FCA said in the announcement post that these crypto derivatives and ETNs may pose harm to retail consumers therefore such kind of crypto-related products are not suited for them. FCA actually called them “ill-suited” products for retail clients. With a flat ban on cryptocurrency derivatives and ETNs, retail investors in the United Kingdom will not be able to have access to these products there, not anymore.

Various reasons were mentioned by the financial regulator in the press release due to which it has imposed a ban on these products in the country while prohibiting retail investors from trading them. The regulator said that the underlying assets of these products have an inherent nature on which retail customers cannot rely. Due to this inherent nature, they cannot provide a reliable valuation basis to customers. Moreover, retails investors do not have any legal investment need for making an investment in cryptocurrency derivatives and exchange-traded notes (ETNs), said the UK regulator.

Stating more, the Financial Conduct Authority said that retail customers also do not fully understand cryptocurrencies and their nature. The prices of digital currencies also keep fluctuating and hence they show extreme volatility. Also, the British financial watchdog said “market abuse and financial crime” are prevalent “in the secondary market”. These were the few things that concerned the Financial Conduct Authority leading the watchdog to impose a ban on ETNs and digital currency derivatives.

The Interim Executive Director of Strategy & Competition at the FCA Sheldon Mills said that their supreme priority is to ensure the protection of customers and therefore, the ban has been imposed on these products after considering their potential harm for the retail customers. Mills further said that this ban clearly reflects their seriousness in this matter.

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