Starting from January 6, 2021, U.K.’s Financial Conduct Authority (FCA) has officially banned the sale of cryptocurrency derivatives and exchange-traded notes to retail users, more than a year after first proposing such a ban.
Why?
The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the:
inherent nature of the underlying assets, which means they have no reliable basis for valuation (and they included here what they call ''even well known cryptocurrencies such as Bitcoin, Ethereum and Ripple'', well agree to disagree here, as they knowledge is outdated and seems to be stuck somewhere in the 2017)
prevalence of market abuse and financial crime in the secondary market (eg cyber theft) - interesting, we can also point out how much money laundering is done via well known banks, but this will not close the banks or stop us from opening an account there. With education, anyone can learn how to keep their wallet safe, for God sake, i know now scores of people older than 90 that just learned how to use Zoom, if they can do it, anyone can learn how to keep a wallet safe, it is not that hard.
extreme volatility in cryptoasset price movements, this one is true, and you need to learn how to deal with that, psychologically speaking. I would suggest investing small amounts regularly to start with, and then study and learn.
inadequate understanding of cryptoassets by retail consumers. Again, study and learning.
lack of legitimate investment need for retail consumers to invest in these products. Yah, this is the reason why the flower shop next to my Mom's building started to accept BTC payments. This is just extreme prejudice and not enough willingness to bother to read a page or two about it.
So, to summarize, all these motives only show that the U.K.’s Financial Conduct Authority (FCA) is an antiquated enteprise, who cannot learn to adapt and has an unfocused, unwilling, broken view of the real world. To address these harms, real or not, the FCA has made rules banning the sale, marketing and distribution to all retail consumers of any derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK. The official position, using the persona of Sheldon Mills, interim Executive Director of Strategy & Competition at the FCA, said:
‘'This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here. Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection.’'
And the final conclusion, i quote '' As the sale of derivatives and ETNs that reference certain types of cryptoassets to retail consumers is now banned, any firm offering these services to retail consumers is likely to be a scam.'' Right, when your decision was based on this research:
73% of UK consumers surveyed don’t know what a 'cryptocurrency' is or are unable to define it – those most aware of them are likely to be men aged between 20 and 44. We estimate only 3% of consumers we surveyed had ever bought cryptoassets. Of the small sub-sample of consumers who had bought cryptoassets, around half spent under £200 – a large majority of these said they had financed the purchases through their disposable income. Bitcoin appears to be the favourite cryptoasset for consumers with more than 50% of the cryptoasset owner survey sub-sample reporting to have spent their money on this product, while one in three [34%] chose Ether.
Hre are few infographycs related to the research:
What do you think about this? I would wonder now, how RobinHood platform could predict this, given that they just closed their UK bussines few weeks ago. What will be next? We will see.
Yours truly,
G.
Bibliography:
1. https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers
3. https://www.fca.org.uk/news/press-releases/fca-reveals-findings-first-cryptoassets-consumer-research
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