Crypto derivatives in trouble as UK regulator mulls market meltdown
The Financial Conduct Authority (FCA), the UK financial watchdog, is looking to take regulatory action on crypto derivatives amid a series of market meltdowns that has left all major coins plummeting.
Senior executives from the FCA spoke at an event in London regarding the regulatory approach towards crypto on Tuesday, during the second market crash in six days.
“We’re concerned that retail consumers are being sold complex, volatile and often leveraged derivatives products based on exchange tokens with underlying market integrity issues,” said Christopher Woolard, director of strategy and competition at the FCA.
He added that the regulator will “consult on a prohibition of the sale of retail consumers of derivatives”. He listed contracts-for-difference, options, futures and tradeable securities in this regard.
In his speech, Woolard explained the findings of the Cryptoassets Taskforce – created by the FCA, HM Treasury and the Bank of England to study the impact of digital assets and distributed ledger technology (DLT) in the financial world.
The study, published at the end of last month, had identified three major harms from such assets – to consumers, to market integrity and the risk of financial crime. All three financial authorities are taking steps over the months ahead to address these issues.
The taskforce had recommended a ban on the sale of cryptocurrency related derivatives to retail consumers last month.
He said that the the FCA defines cryptoassets, such as Bitcoin and Litecoin, as “exchange tokens”. According to the FCA’s definition, these tokens, “utilise a DLT platform and are not issued or backed by a central bank or other central body. They do not provide the types of rights or access provided by security or utility tokens, but are used as a means of exchange or for investment”.
Woolard mentioned that by the end of the year, the FCA will consult on perimeter guidance to “help clarify which cryptoassets fall within the FCA’s existing regulatory perimeter, and those cryptoassets that fall outside”.
Image via Shutterstock
Join our Telegram group