Crypto-derivatives sales ban proposed by the FCA - Thistle Initiatives

What happened?

The FCA is proposing in its Consultation Paper CP 19-22, issued in July 2019, rules to address harm to retail consumers from the sale of crypto-derivatives and exchange-traded notes (ETNs) referencing certain types of cryptoassets. The CP is available here.

The FCA considers that these products are ill-suited to retail consumers who cannot reliably assess the value and risks of crypto-derivatives or ETNs that reference certain cryptoassets (crypto-derivatives). This is due to:

• the inherent nature of the underlying cryptoassets, which have no reliable basis for valuation,
• the prevalence of market abuse and financial crime in the secondary market for cryptoassets (e.g. cyber theft),
• extreme volatility in cryptoasset prices movements, and
• inadequate understanding by retail consumers of cryptoassets and the lack of a clear investment need for investment products referencing them

These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products. The FCA is therefore consulting on banning the sale, marketing and distribution to all retail consumers of all crypto-derivatives (i.e. contracts for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK. This consultation fulfils the FCA’s commitment in the UK Cryptoasset Taskforce Final Report to explore a potential ban.

Respondents to the CP are asked to send comments by 3 October 2019. The FCA will consider all feedback received by the closing date.  Should it decide to proceed with final rules, it intends to publish a final policy statement and Handbook rules in early 2020.

How can Thistle help you?

All UK firms involved with crypto-derivatives for retail clients will need to review their business models and decide how, if at all, they can continue trading beyond the end of 2019.

If you’d like to know more about any of the topics covered above – or to learn more about how Thistle can help – please get in touch via info@thistleinitiatives.co.uk or call us on 0207 436 0630.