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Is the FCA about to ban investors from buying crypto derivatives?

According to “Restricting contract for difference products sold to retail clients”, an official document released on 1st July, the Financial Conduct Authority (FCA) is planning to ban on all sales of crypto derivatives (CFDs) to retail investors. 

In the document the FCA say:

“We will shortly publish a CP (consultation paper) on a potential ban on the sale to retail clients of derivatives and certain transferable securities that reference cryptoassets”  and while their use of ‘derivatives’ and ‘securities’ covers a wide range of crypto-related products, our feeling is their primary target is probably bitcoin (BTC) futures.

The FCA went on to say that this initiative is simply the next step they need to take in order to fulfil the role they committed to play when the UK Cryptoasset Taskforce Final Report was published in July 2018.  They also stressed any new rules put forward in their consultation paper would overwrite the existing regulation of crypto-based contracts for difference (CFDs).

One FCA representative said the watchdog “will be consulting on potentially banning the sale to retail customers of derivatives linked to certain cryptoassets this year” but, when pressed for a timescale for the ban, could only offer “shortly”.

In another statement the FCA explained why they have chosen to impose restrictions on CFDs. 

They consider them to be “complex, leveraged derivatives” and “ill-suited to retail investors “who cannot reliably assess the value and risks of derivatives that reference certain cryptoassets”.  This has led them to conclude they therefore pose an “excessive” risk to inexperienced retail investors especially as there is likely to be a prevalence of “market abuse and financial crime” in the market and that’s before you add in the “extreme” volatility of cryptocurrencies, the well-publicised “underlying market integrity issues”  and a general lack of understanding amongst retail investors.

In their press release the FCA also said they “estimate the potential benefit to retail consumers from banning these products to be in a range from £75 million to £234.3 million a year.”

While the process used to come to that figure has obviously not been shared, one of the leading factors has to be fraud.  As with any other type of crypto trading fraud, when it comes to trading CFDs trading there are a number of numerous digital fraudsters – not to mention unlicensed and unregulated brokers and traders – waiting to pounce.

Our law firm is one of the very few that can genuinely claim to be experts in cryptocurrency fraud.  We’ve been helping clients recover the money they’ve lost as a result of crypto trading fraud for years and, as you’d expect given the figures the FCA have put forward, more and more of our work I linked to CFD-related fraud. 

Our experience has taught us that there are 3 things you can do to protect yourself against becoming a victim of CFD fraud:

  1. Do your due diligence

Most CFD scams are run by unlicensed brokers or traders so always use registered brokers with a proven track record and solid credentials.

  1. Check all of the Ts and Cs

Check all of the terms and conditions and any guidelines you’re given.  Then check them again preferably with a lawyer who understands the sector as they’ll be able to confirm whether or not they are credible and legitimate.

  1. Use strong passwords

The stronger your password (and this needs to include upper case, lower case, punctuation marks and numbers), the harder your account will be to crack if you do need to forward payment.

As we mentioned earlier in the blog, we specialise in recovering the money our clients have lost as a result of cryptocurrency and digital fraud.  If you have been the victim of any type of cryptocurrency fraud, please call us today on 020 7792 5649 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

We will help. 

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