- The FCA has banned amateur investors from buying and selling Cryptocurrency futures and options
- The ban comes into effect on January 6th, 2021
FCA cracks down on crypto trading
The UK’s cryptocurrency market has been shaken to its core following an announcement by the FCA. To protect amateur investors, the Authority has decided to ban the sale of Bitcoin futures and derivatives to retail-consumers. This decision comes hot on the heels of a study by Cambridge University. The study found that most UK-based Crypto investors are operating without a license. The FCA says the purpose of the ban – which will become law on January 6th, 2021 – is to protect amateur investors from “sudden and unexpected losses.”
The FCA hopes that the ban will protect amateur investors as their inexperience leaves them vulnerable to market uncertainty. This makes them more susceptible to financial crime or loss of profits due to crypto markets’ inherent volatility. It is telling that the ban comes just weeks after the DOJ’s decision to prosecute the owners of BitMEX for money-laundering. This indicates a broader shift by governments around the world to regulate cryptocurrency platforms to combat fraud.
The impact of the ban
The ban does not apply to professional entities free to continue trade in futures and derivates. The FCA ban does impact a disproportionate number of UK-based crypto investors, however. Of the 4% of the UK population with crypto-currency assets, roughly 75% are retail consumers. This means that the cryptocurrency market in the UK is likely to suffer for quite some time. It is also likely that the ban could have the reverse of the intended effect. Retail-consumers are now more likely to invest in crypto markets outside of the UK to circumvent the ban.
Such a movement will hinder the growth of the UK cryptocurrency market and place amateur investors at risk. The FCA has no power over crypto-exchanges based abroad and will be unable to protect retail-consumers as a result.