UK regulator bans sale of crypto-asset trackers to retail investors

It says there is no reliable basis for valuing derivatives and exchange-traded notes whose underlying assets are virtual currencies, tokens and similar products. Most retail investors lose money on them, it said, claiming that the ban will save investors GBP53 million a year.

The inherent uncertainty in the value of unregulated transferable crypto-assets, and their extreme price volatility, is not the only reason for the ban, says the FCA. It also pointed to the prevalence of market abuse and financial crime, such as cyber theft, in the secondary market; inadequate understanding of crypto-assets by retail consumers and the lack of any legitimate need for retail consumers to invest in these products.

‘These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products,’ said the FCA. 'We have evidence of this happening on a significant scale,’ said FCA interim Executive Director of Strategy and Competition, Sheldon Mills. ‘The ban provides an appropriate level of protection.’

The ban covers well-known tokens Bitcoin, Ether and Ripple, and derivative financial instruments that reference them. It will come into force on 6 January 2021.

The FCA has said that UK consumers should continue to be alert for crypto-derivative investment scams, as any offering of these services to retail consumers from now on is likely to be fraudulent.

Sources

• FCA
• Reuters
• STEP UK News 3 September 2020: FCA proposes bringing crypto-asset exchanges into reporting rules