Recently published, The Economist article argues that a ban on cryptocurrency derivatives seems imminent.
The piece furthers that the crypto-regulators in the world may soon begin putting in efforts for the cryptocurrency derivatives to be outlawed. This may prevent an inconsistent market and protect retail investors.
Financial Conduct Authority (FCA) propositioned an injunction on any opportunities that allow investors to bet on the prices of cryptocurrencies, including their futures, possibilities, and other produce. FCA needs a bit more time for its consultation with financial controllers and regulators.
The article by The Economist also states how FCA has no intention to back off from their stance of banning crypto-derivatives. The British watchdog will, on the other hand, come out with its stance at the start of the year 2020. The main reason behind this could be the involvement of inexperienced retail investors, which could lose everything easily by trying to follow enormous gains.
Why a ban on cryptocurrency derivatives?
Investors from Britain alone lost about five hundred million dollars ($492m) on crypto-derivatives in 2018 during the bearish trend. If prohibitive steps are implemented any time soon, this number will reduce down to two hundred million dollars ($200m).
Jacqui Hatfield, who spearheads the Orrick, which is a London-based law firm, called this a “knee-jerk” reaction and showed his skepticism regarding this initiative. He also pointed out how all kinds of derivatives are risky, be it cryptocurrency or otherwise.
It is also to be considered how traders and investors, who enjoy the unorthodox and unregulated methods of trade, can always resort to those kinds of platforms which offer this methodology of trade. For example, the Seychelles-based BitMEX is a platform where individuals like this nest.