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The British Financial Regulator Intends to Ban Crypto Related Derivatives

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The British government watchdog has announced it is launching a consultation that will contemplate banning the sales cryptocurrency-based derivatives. This major intervention by the government into the UK cryptocurrency market, has the possibility of affecting crypto instruments such as futures, options and contracts for differences.

In a report released by the U. K’s Crypto Assets Taskforce’s on Monday, October 29, 2018, it proposed modifications for cryptocurrency regulation which governs the use and trading of digital assets and cryptocurrencies. The Taskforce which was launched this March, comprises the Financial Conduct Authority (FCA) and the Bank of England (BOE) and is responsible for regulating and providing supports for crypto technologies.

The Taskforce states that it has future plans to implement the proposals in early 2019 and come with fears that crypto based assets are extremely volatile and can cause losses for amateur customers that invest heavily into it, while marketers are aggressively selling the products. The report further reads:

“The risk of trading losses can be exacerbated by product fees such as financing costs and spreads, as well as by a lack of transparency in the price formation of the underlying crypto asset.”

The report also notes that cryptocurrencies for differences (CFDs) and futures can cause huge losses which are even made worse by financing costs, product fees and lack of transparency which made FCA suggest the following prohibition:

“Given concerns identified around consumer protection and market integrity in these markets, the FCA will consult on a prohibition of the sale to retail consumers of all derivatives referencing exchange tokens such as Bitcoin (BTC), including CFDs, futures, options and transferable securities.”

If the proposals pass, then it will further hurt large players in the crypto market, following the new rules imposed by ESMA’s.

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