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FCA bans sale of crypto-derivatives to retail consumers, starting 2021

Updated: Jul 25, 2024
Published: Oct 6, 2020
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Original Proposal

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Over a year ago, the UK’s financial watchdog proposed a ban on crypto-derivatives such as contracts for difference (CFDs), futures, options and exchange traded notes (ETNs). When the proposal was made public, the UK was still part of the European Union and applying it would require them to wait until Brexit was done.

Ban Finalised

A year later, when the UK no longer is part of the European Union, this proposal has been made final. The Financial Conduct Authority (FCA) has released an article finalising the details of the ban of sales of crypto-derivatives to retail consumers. The ban will come into effect starting January 6th 2021.

Crypto-Derivatives are “Ill-Suited”

According to the FCA, such products are “ill-suited” to retail consumers and pose a threat of potential harm to them. Additionally, they stated that is so because these products cannot be properly valued by retail consumers because of their:

  • inherent nature of the underlying assets, which means they have no reliable basis for valuation
  • prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
  • extreme volatility in cryptoasset price movements
  • inadequate understanding of cryptoassets by retail consumers
  • lack of legitimate investment need for retail consumers to invest in these products

FCA’s Comments

Sheldon Mills, interim Executive Director of Strategy & Competition at the FCA, said: “This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.” The FCA estimated to save £53m from the ban.

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