The Financial Conduct Authority (FCA) has banned the sale of derivatives and exchange traded notes that reference certain types of cryptocurrencies like bicoin, ripple and ether to retail consumers.
The regulator argued that those cryptoassets were potentially too harmful for retail consumers. The risk was deemed significant because the FCA said that these assets had no reliable basis for valuation and that they posed a prevalence of market abuse and financial crime in the secondary market.
Moreover, cryptocurrencies have shown “extreme volatility in cryptoasset price movements” and that an “inadequate understanding of cryptoassets by retail consumers” could lead to huge losses, for the the retail customers, the FCA noted.
“This ban reflects how seriously we view the potential harm to retail consumers in these products,” said Sheldon Mills, interim executive director of strategy and competition at the FCA. “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.”
The ban will come into effect on 6 January 2021.
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