FCA proposes retail ban on crypto derivatives products

The UK’s financial market regulator, the Financial Conduct Authority (FCA), has proposed a ban on cryptocurrency derivatives platforms like BitMEX.

According to a statement published on Wednesday, the FCA cites “extreme volatility” as a reason for cryptocurrencies being “ill-suited” to smaller retail investors.

The statement claims that retail investors “cannot reliably assess the value and risks of derivatives or exchange traded notes (ETNs) that reference certain crypto-assets”.

It continued: “We estimate the potential benefit to retail consumers from banning these (derivative) products to be in a range from £75 million ($94 million) to £234.3 million ($305 million) a year.”

Cryptocurrency derivatives platform BitMEX, which recently surpassed $1 trillion in trade volume over the past year, is currently prohibited to traders in the US, many of whom access the platform via VPNs.

The FCA’s statement added: “As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets.

“Most consumers cannot reliably value derivatives based on unregulated crypto-assets. Prices are extremely volatile, and as we have seen globally, financial crime in crypto-asset markets can lead to sudden and unexpected losses.

“It is therefore clear to us that these derivatives and exchange traded notes are unsuitable investments for retail consumers.”

BitMEX offers customers 100x leverage for Bitcoin perpetual swap and futures markets, with several altcoin contracts also being made available to trade.

The platform’s insurance fund, which grows daily through order liquidations, now stands at 29,202 Bitcoin – equivalent to £264 million.

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