UK Financial Watchdog Urged to Reconsider Banning Crypto-Derivatives by World Federation of Exchanges


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In an official statement issued on October 7, 2019, the World Federation of Exchanges (WFE) – a global body for exchanges and cryptocurrency trading platforms – asked the U.K.’s Financial Conduct Authority (FCA) to reconsider putting a blanket ban on the sale of crypto derivative products to retail investors.

Extending the Helping Hand

The WFE has asked the British financial watchdog to not ban the sale of cryptocurrency-based financial products to retail consumers. At the same time, the global body has also expressed the desire to support the regulator’s vision to put in place better protection mechanisms for the vulnerable and novice crypto investors.

Notably, this development comes just three days after the FCA had detailed its intentions of putting a complete ban on the sale of digital currency financial instruments such as options and futures. The regulator had asked industry players to suggest effective measures to safeguard investors from the notoriously volatile price movements of cryptocurrency-based financial instruments.

In response, the WFE has extended its hand forward to help the FCA find the right balance between keeping a check on nefarious elements in the crypto space while at the same time create a cohesive and encouraging environment that would help crypto startups build their business.

In its official statement, the WFE said that it “recognizes the volatility identified by the FCA in its consultation report and is supportive of ensuring that proper consumer protection is put in place as a priority for any new and relatively untested product on the market.”

Recommendations Made by the WFE

Notably, the WFE has made multiple recommendations to mitigate risks associated with crypto-derivative products for retail investors.

The exchange body urged the regulators to give consideration to the underlying market structures and stated that regulated exchanges vastly diminish the risk profile for retail investors. The WFE also recommended the persuasion of options to mitigate excessive risk exposure for retail investors while at the same time also work toward the introduction of “standards” for such products.

Finally, it stated that a review of the ban is necessary (should it be green-lighted) keeping in mind the market’s dynamic nature and to ensure that its consumers have sufficient choices when it comes to participating in such markets.

Concluding, Nandini Sukumar, Chief Executive Officer, WFE, said:

Consumer protection must be foremost when seeking to regulate new and innovative products. While crypto asset products have real potential, the market has suffered from unregulated providers distributing inappropriate products. Market infrastructures that adhere to strict regulatory requirements, embed consumer protection as part of their mandate and understand that integrity is fundamental to well-functioning markets, are best placed to deliver these products and support the developing marketplace. We ask that authorities, including the FCA, chart the right regulatory course to allow the market to flourish and benefit its consumers even as we understand that it’s a balancing act.

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