Turns out that the United Kingdom has decided to take a rather drastic step towards the regulation of cryptocurrencies. The Financial Conduct Authority (FCA) is proposing rules to address harm to retail consumers from the sale of derivatives and exchange traded notes (ETNs) referencing certain types of cryptoassets, as per an official press release.
The reasons that the FCA listed out were: inherent nature of the underlying assets, which have no reliable basis for valuation; the prevalence of market abuse and financial crime in the secondary market for cryptoassets (eg cyber theft); extreme volatility in cryptoasset prices movements.
Speaking about this development, Christopher Woolard, Executive Director of Strategy & Competition at the FCA, said, “As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets.”
He added, “Most consumers cannot reliably value derivatives based on unregulated cryptoassets. Prices are extremely volatile and as we have seen globally, financial crime in cryptoasset markets can lead to sudden and unexpected losses. It is therefore clear to us that these derivatives and exchange traded notes are unsuitable investments for retail consumers.”
This news comes as bit of a disappointment, given that earlier this year, in January, the FCA had published a paper on cryptoassets regulations specifically for cryptocurrency traders and the community at large.
Talking about the requirement of such a paper, the regulatory body had said, “We hope to clarify FCA expectations for firms carrying on cryptoasset activities within the UK. If a firm acts in line with this Guidance, the FCA will consider them to have complied with regard to the aspects of the requirement to which the Guidance relates. This Guidance represents the FCA’s views and does not bind the courts, but it can be persuasive in any determination by courts, for example enforcing contracts.”
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