Prohibition of digital currency derivatives now applies in the UK – CoinGeek


A ban on the sale of digital currency derivatives to investors in the UK has officially entered into force. The ban was proposed by the Financial Conduct Authority (FCA) in October and became law on January 6.

As CoinGeek reported, the FCA said that derivatives were not suitable for private customers due to the damage they cause. These customers may not be able to value derivatives accurately due to the existence of market manipulation, extreme volatility, insufficient understanding and the inherent nature of digital assets, among other things, according to the regulator. With the ban, the regulator believes it will save £ 53 million ($ 72 million) in losses for investors.

This ban now applies. And while the watchdog is convinced that the ban will protect consumers, some digital currency experts have not agreed. Many believe that the ban will only drive investors to unregulated platforms. The FCA has no authority over these platforms and this may lead to higher risks for consumers.

Dermot O’Riordan is one of those who oppose the ban. Dermot is a partner in Eden Block, a venture capital company that invests in blockchain startups. He believes that the ban shows the FCA’s lack of ability to regulate the digital currency industry. He said:

It’s a shame because the only players that are actually regulated (or want to be) to offer crypto derivative products to the retail trade (Coinshares, Crypto Facilities, etc.) are generally good players. This move will lead retail users to unregulated platforms such as Deribit and BitMEX that will offer even less protection than regulated players. So it is not clear how the average retail user wins in this scenario. ”

Traders in the UK will still be able to access direct purchases of digital currencies despite the ban. On the flip side, for companies that specialize in derivatives, the effect will be significant. One of these is CoinShares, a British company that is the largest digital asset manager in Europe with $ 2.9 billion in plan assets. However, the company has downplayed the effect of the ban.

The product manager at the company Townhead Lansing claimed: “As far as our business is concerned, nothing has changed since the announcement of the ban. We do not expect it to have any significant impact. We have a broad and varied customer base. ”

Some in the industry have praised the ban. CEX.IO’s CEO Konstantin Anissimov believes that the ban was necessary to protect customers. Speaking to CoinGeek, he said:

“Regulation of cryptocurrency derivatives ensures that fair and reasonable levels of risk are presented to the public and essentially protects investments from retail investors. As we have already seen what has happened with BitMEX in the US, we believe that it will have a negative effect on market participants who ignored and neglected this regulation which has now entered into force. ”

See also: CoinGeek Live Panel, Digital Currency and Global Compliance: Tools and Tips for Exchanges, Wallets and Other Service Providers

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