UK financial watchdog limits crypto-derivative trading


The UK’s financial watchdog has prohibited the sale of cryptocurrency-related derivatives to retail consumers due to concerns that consumers don’t understand the risks they’re taking.

On Tuesday, the UK Financial Conduct Authority (FCA) issued its final rules banning the sale of derivatives and exchange traded notes (ETN) based on “certain types of cryptoassets” to retail consumers. The new rules, which affect “firms acting in, or from, the UK,” will take effect on January 6, 2021.

As a result of its new policy, the FCA warned consumers that any pitch they subsequently encounter for crypto-related derivatives – contracts for difference (CFD), options and futures – is “likely to be a scam.” These products are “ill-suited for retail consumers due to the harm they pose” and the ban could collectively save consumers £53m in “sudden and unexpected losses.”

The FCA has long sought to limit CFDs and spread betting, leading to significant tumbles in the share prices of companies offering these products to UK customers. UK-listed companies such as Plus500 and CMC did report declines on Tuesday, but only in the 1-3% range.

The FCA’s 2019 report on its consultation with stakeholders and the public found that “the peaks and troughs of price of each [crypto] token are highly correlated,” suggesting that these movements were “driven by speculation, akin to gambling.”

Tuesday’s announcement notes that discussions with retail consumers found that 47% of consumers surveyed bought cryptoassets “as a gamble that could make or lose money,” up from 31% in a 2019 FCA survey. 

Left unsaid is that tokens such as Bitcoin Core (BTC), Ethereum and Ripple don’t have much to offer beyond the speculation that they’re some form of ‘digital gold,’ the value of which might skyrocket at any moment.  The resistance of the cabals behind these tokens to anything resembling adequate scaling capacity means they’re incapable of living up to their stated purpose – a truly global currency that can handle transactions large, small and microscopic on a friction-free basis.

Fortunately, the unlimited scaling capacity of Bitcoin SV (BSV) offers consumers both ease of use and transaction fees under a penny. BSV also offers regulators an auditable transaction trail to separate itself from the ‘crime coin’ crowd, while the online gambling sector – everyone from regulators to operators to customers – are swiftly catching on to the possibilities BSV can offer.