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
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.