FCA Survey Shows Disapproval for Ban on Retail Derivatives
Earlier this week, a landmark decision was made by the Financial Conduct Authority (FCA) this week, when it imposed a ban on the sale of cryptocurrency-based derivatives to retail traders. A number of people have expressed their displeasure in light of the ban. However, it appears that the FCA was fully familiar with the fact that people would be displeased about their decision but still decided to go ahead. The decision of banning these crypto-based derivatives in the United Kingdom was being contemplated for a long time. The possibility had first surfaced back in 2018, when the ban was called for by the Crypto asset Taskforce of the government.
This was done because of newfound dangers that stemmed from contracts for difference (CFDs) and exchange-traded notes (ETNs), particularly for retail traders. Eventually, the derivatives ban was proposed by the FCA last year and it explained in a document that they were going to pay heed to the recommendations of the Task Force. In a separate policy document, the agency had added that this move could help retail investors in saving from 267 million pounds, which is the equivalent of $338 million, to 451 million pounds, which are equal to a whopping $570 million on a yearly basis.
Even at that point, things had remained a bit uncertain and murky. There were obviously questions of how the ban would be put into effect and whether the people would actually go along with it. The FCA decided to conduct a survey for testing public sentiment and they released this survey earlier this week. According to the survey report, the participants were found to be significantly displeased with the ban. A total of 527 people were asked by the FCA to give their responses in the survey, which comprised of trade organizations, retail customers, national competent authorities (NCAs) with the European Union, and crypto firms.
The results highlighted that 97% of the total respondents were against the ban proposed by the FCA. Most of these detractors argued that the digital assets that were involved in these derivatives had intrinsic value. As they can be used as payment instruments, they can be valuable for retail traders. They also highlighted that the ban would be disproportionate because it was possible for retail traders to buy cryptocurrencies on their own, which would also have their inherent risks. While they did understand the desire of the FCA to protect consumers, they urged the agency to consider a different regulatory approach rather than banning outright.
Regardless of these opinions, the FCA decided to go ahead with the ban. Earlier this week, it announced in a press release that it had consulted with others over the use of these digital assets for retail customers and had come to the conclusion that they were dangerous. The FCA said that it was banning the assets because they lacked a reliable basis for their valuation. It also said referred to their price volatility and said that they were vulnerable to criminal activity.
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