FCA Proposes Ban on Sale of Crypto-Derivatives to Retail Consumers
FCA is proposing rules to address harm to retail consumers from the sale of derivatives and exchange-traded notes referencing certain types of crypto-assets. The consultation proposes to ban the sale, marketing, and distribution to all retail consumers of all derivatives (that is, contract for difference, options, and futures) and exchange-traded notes that reference unregulated transferable crypto-assets by firms acting in, or from, the UK. This consultation fulfills the FCA commitment in the UK Cryptoasset Taskforce Final Report to explore a potential ban. The consultation period ends on October 03, 2019. In case FCA decides to proceed with the final rules, it intends to publish a final policy statement and Handbook rules in early 2020.
FCA considers these products are ill-suited to retail consumers that cannot reliably assess the value and risks of derivatives or exchange-traded notes that reference certain crypto-assets (crypto-derivatives). This is due to the:
- Inherent nature of the underlying assets, which have no reliable basis for valuation
- Prevalence of market abuse and financial crime in the secondary market for crypto-assets (for example, cyber theft)
- Extreme volatility in crypto-asset prices movements
- Inadequate understanding by retail consumers of crypto-assets 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. In January 2019, FCA also consulted on a guidance on crypto-assets (CP19/3) to clarify what types of crypto-assets fall within the current regulatory perimeter; the consultation closed on April 05, 2019. FCA expects to publish the final guidance on crypto-assets later in the summer and has reflected feedback to that consultation in the proposals for crypto-derivatives. This consultation will be relevant for firms issuing or creating products referencing crypto-assets; firms distributing products referencing crypto-assets, including brokers and investment platforms, and financial advisers; firms marketing products referencing crypto-assets; operators of trading venues and platforms; and retail consumers and consumer organizations
Related Links
Comment Due Date: October 03, 2019
Keywords: Europe, UK, Banking, Securities, Crypto-Assets, Crypto-Derivatives, Exchanged-Traded Notes, FCA
Previous Article
European Council Publishes Final Compromise Text for NPL RegulationNext Article
EBA Single Rulebook Q&A: Second Update for July 2019Related Articles
EBA Updates Filing Rules for Supervisory Reporting
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
EBA Publishes Standards on Disclosure of Investment Policy Under IFR
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
APRA Finalizes Guidance for New Prudential Standard on Remuneration
The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.
OCC Updated LIBOR Self-Assessment Tool for Banks
The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).
TCFD Updates Guidance for Financial Disclosures on Climate Risk
The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
BCBS Report Examines Progress on Adoption of Basel III Framework
The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.
ACPR Implements Updates Related to DPM Version 3.1
The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.
EBA Note Examines Transition Risks of Benchmark Rates
The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.
