U.K. Financial Watchdog Mulls Banning Cryptocurrency-Derivative Products


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According to a report by The Economist, the U.K.’s financial watchdog, the Financial Conduct Authority (FCA) is considering putting a blanket ban on cryptocurrency-derivative products, including options, futures, and other novel financial instruments.

FCA Mulling Banning Crypto Financial Instruments

Observing the wildly volatile nature of cryptocurrency financial products, the FCA is reportedly considering placing a ban on bitcoin (BTC) and other digital currency-based financial instruments. This decision comes two weeks after the price of bitcoin crashed by more than $1000 in 30 minutes which subsequently liquidated some $643 million worth of bitcoin contracts on crypto trading platform BitMEX.

The FCA is considering putting a complete ban on the sale of crypto-derivatives to retail investors. The British watchdog is expected to come out with an official decision in early 2020.

According to crypto research firm Chainalysis, until now, in 2019, more than $23 billion worth of crypto options and futures have been traded. That said, dramatic price plunges like that observed two weeks ago is concerning for financial regulators and institutions across the globe.

Per the FCA, British crypto investors sustained a loss of about $457 million on crypto-derivatives from mid-2017 to the end of 2018. The watchdog has also identified two major features of crypto products that can make the loss even more taxing – leverage and high trading costs. In its estimate, the FCA believes that a crypto blanket ban could help reduce consumer losses by as much as $288 million.

Combating Crypto Elsewhere

Understandably, different countries are employing different strategies to tame the often misunderstood beast that is cryptocurrency, even major crypto-powerhouse Japan is considering tightening the noose around cryptocurrency exchanges.

As reported by BTCManager on May 24, 2019, the island nation’s Financial Services Agency (FCA) had instructed all bitcoin trading venues and digital assets exchanges in the region to bolster their know-your-customer (KYC) and anti-money-laundering (AML) measures.

Nearby, in South Korea, the peninsular nation’s financial watchdog, the Financial Services Commission (FSC) has often found itself on the receiving end of crypto enthusiasts, experts, as well as law and policymakers for being too harsh toward the local cryptocurrency industry.

Elsewhere, in Europe, Germany is also contemplating closer supervision of the local crypto space.

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