FCA’s Decision To Ban Individual Investors Speculating On Cryptos - Pro's & Con's.

FCA’s Decision To Ban Individual Investors Speculating On Cryptos - Pro's & Con's.

2020-10-12 | Big Bob

FCA’s Decision To Ban Individual Investors Speculating On Cryptos - Pro's & Con's.

United Kingdom regulatory authority FCA’s [Financial Conduct Authority] recent decision to ban individual investors from speculating on Bitcoin [BTC] and other cryptocurrencies is probably going to possess a minimal impact, partly as the market is so limited, consistent with analysts & industry executives who are tracking the trading business.

While some of the U.K.-based brokerages that had offered the cryptocurrency derivative products to retail traders could see a drop-off in revenue, though big cryptocurrency exchanges along with Kraken say the impact is probably going to be minimal. While U.K. individuals can still trade in the particular cryptocurrencies, there could also be some traders who will seek to skirt the principles by trading on offshore exchanges.

The ban is about to require effect, starting from January next year. Professional investors weren’t barred from trading cryptocurrency derivatives partly as they “have a greater understanding of the risks and greater capacity to soak up potential investment losses,” consistent with an FCA's report this month.

“Those still keen on trading cryptocurrency derivatives will just find ways to open accounts in unaffected regions,” Don Guo, CEO of Broctagon Fintech Group, added. “There may be a stark risk that retail traders will simply trade on unregulated exchanges, that actually puts them at more risk.”

On the other hand, few U.K.-based retail investors trade crypto derivative products directly, consistent with Sui Chung, CEO of CF Benchmarks, that offers price indexes to exchanges along with Chicago-based CME Group.

Instead, they normally undergo so-called contracts for difference [CFD] providers, Chung added.

Regulated brokers & exchanges that had offered cryptocurrency derivatives and ETNs [Exchange-traded Notes] to retail traders along with the Kraken-owned Cryptocurrency Facilities, CMC Markets as well as IG Index.

“This features a very minimal impact on Crypto-related facilities,” a Crypto Facilities spokesperson added.

“We anticipate no material impact resulting from the FCA's announcement as these products form a really small a part of our diversified and global business,” IG Group revealed within an official statement. ”The impacted revenue following the FCA's restrictions would be even less than 1% of IG Group’s overall revenue.”

As reported earlier in May, crypto-assets made up 2.7% of IG Group’s total revenue this year, of which the United Kingdom market was solely 1% to 1.5%, consistent with an official report by Vivek Raja and Paul McGinnis, analysts from Shore Capital, earlier on 6th Oct. Consistent with the note, crypto was within 18% of CMC Markets’ total revenue as of March.

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