The FCA has banned the sale of a swathe of cryptocurrency investments to retail investors in the UK.
The FCA has published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets to retail consumers. They consider these products to be “ill-suited” for retail consumers due to the harm they pose.
The regulator said these products cannot be reliably valued by retail consumers because of the inherent nature of the underlying assets, which means they have no reliable basis for valuation, as well as the prevalence of market abuse and financial crime in the secondary market (e.g. cyber theft).
The FCA also noted the “extreme volatility” in cryptoasset price movements and the inadequate understanding of cryptoassets by retail consumers. They found no legitimate investment need for retail consumers to invest in these products.
Unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as Bitcoin, Ether or Ripple.
To address these harms, the FCA has made rules banning the sale, marketing and distribution to all retail consumers of any derivatives and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.
The FCA estimates that retail consumers will save around £53m from the ban on these products.
The ban will come into effect on 6 January 2021.
This ban reflects how seriously the FCA view the potential harm to retail consumers in these products. Consumer protection is paramount here.
Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives. There is evidence of this happening on a significant scale. The ban provides an appropriate level of protection.
Given the scammers aren’t big on small print anyway, this change won’t cramp their style. People will continue to be conned out of their money until the FCA acts to hold the social media platforms used by the scammers accountable for the fraud they enable.