On October 6, 2020, the UK Financial Conduct Authority (FCA) banned a number of derivative exchanges from offering Bitcoin (BTC) Cs trading products to retail consumers. Here are some of the effects.
According to the FCA at that time, trading crypto assets, including Bitcoin on a derivative exchange (non-spot market) had a high risk if it was used by retail consumers/individuals.
The FCA prohibits it unless offered to institutional users, who are deemed to have a better understanding of how to use the product, including being better able to assess the risks. The rule takes effect early in 2021.
"Such products allow retail consumers to experience sudden and unexpected losses," stressed the FCA.
In the days following the ban, a number of market observers and participants spoke up. In general, according to them, the impact was not too big.
Kraken, which has a derivative market, for example, said that even though it is banned domestically, users may use a platform located abroad, which has no jurisdiction in the UK.
“Those who are still interested in trading crypto-asset derivatives can only find other ways to open accounts in other regions outside the UK. However, if that happens it opens up a greater risk for users, "said Don Guo, CEO of Broctagon Fintech Group, quoted from Coindesk.
According to Sui Chung, CEO of CF Benchmarks, there are a number of crypto derivatives management companies licensed in the UK, including CME Groups headquartered in Chicago, USA. Other platforms are Crypto Facilities (owned by Kraken), CMC Markets, and IG Index.
"The FCA ban has very little impact on our trading volume," said a spokesman for Crypto Facilities.
Even the IG Group acknowledged that the FCA ban only resulted in a decrease in trading volume by 1 percent of its overall business globally.
Based on a study by Vivek Raja and Paul McGinnis, analysts at Shore Capital in October 2020, crypto-asset products on the IG Group derivatives exchange for the UK market are only 1-1.5 percent. Meanwhile, CMC Markets is bigger, which is 18 percent.
Based on the results of the FCA survey, on June 30, 2020, around 3.86 percent of the British population owns crypto assets. 12 percent of respondents said they had "never monitored" the price of the crypto assets they owned.
"Users appear to be treating crypto assets as a form of speculation similar to gambling, not as payments or investments," said the FCA at the time.
