FCA proposes ban on sale of crypto-derivatives to retail consumers

03 July 2019

The Financial Conduct Authority (FCA) is proposing rules to address harm to retail consumers from the sale of derivatives and exchange traded notes (ETNs) referencing certain types of crypto-assets.

The FCA considers these products are ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets (crypto-derivatives). This is due to:

• inherent nature of the underlying assets, which have no reliable basis for valuation
• the prevalence of market abuse and financial crime in the secondary market for cryptoassets (eg cyber theft)
• extreme volatility in cryptoasset prices movements, and
• inadequate understanding by retail consumers of cryptoassets and the lack of a clear investment need for investment products referencing them

These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products.

The FCA is therefore consulting on banning the sale, marketing and distribution to all retail consumers of all derivatives (ie contract for difference - CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.

Comments are to be sent by 3 October 2019.

Full press release

CP19/22: Restricting the sale to retail clients of investment products that reference cryptoassets.

© FCA - Financial Conduct Authority