UK Considering Ban on Crypto Derivatives

On the heels of a report by a coalition of pro-blockchain groups and financial institutions warning UK officials not to over-regulate the industry, the Financial Conduct Authority is weighing whether or not to ban certain crypto-related derivatives.

While all eyes were on the budget yday, the FCA quietly announced that it considering a ban on leveraged crypto derivatives.

Co/irnNeh5TsA. - Hannah Murphy October 30, 2018.Dual Reports, Conflicting ViewsThe FCA was part of its own group, the Cryptoasset Taskforce, along with the UK Treasury and the Bank of England.

In its report, the UK regulatory body also states that it believes crypto assets threaten to destabilize the UK's economy, while the other side argues driving crypto business away would hurt the country's reputation as a fintech hub.

The FCA is specifically looking at a ban on cryptocurrency based derivatives to retail investors.

Are already making money trading crypto-based CFDs based on popular cryptocurrencies like Bitcoin, Litecoin, Monero, and EOS. Since these financial instruments are classified as derivatives, the CFD has jurisdiction over their control.

Deciding What Falls Under FCA JurisdictionThere are other crypto-based assets that fall into more of a grey area.

The FCA appears to have gone from a more neutral stance on distributed ledger technology to advocating more strongly for its regulation, at least insofar as its use in creating financial derivatives.

"Given the complexity and new challenges presented to traditional forms of financial regulation, more time is needed to consider how regulation can meaningfully address the risks posed by exchange tokens, such as bitcoin."

In Q1 of 2019, the FCA said it will hold a separate consultation on whether to ban the sale of crypto-based derivatives to retail investors, as well as make decisions on whether to regulate crypto exchanges and wallet providers.