U.K.: FCA Ban on Crypto Derivatives to Have Minimal Impact on Market, Experts Say

The U.K. FCA’s decision to ban the sale of crypto derivatives to retail customers seems to be having minimal impact.

Crypto Market Unfazed

The U.K. financial watchdog’s decision to ban the sale of cryptocurrency derivatives to retails investors seems to be having little to no impact on the infant market’s dynamics, according to analysts and industry experts.

According to a Coindesk report published on October 12, 2020, the Financial Conduct Authority’s (FCA) diktat prohibiting the sale of crypto derivatives – scheduled to come into force from January 2021 onwards – is not likely to severely impact the small market.

Per major cryptocurrency exchange platform Kraken, the directive will impact the business of some small U.K.-based brokerages that deal in crypto derivative products for retail customers and could witness their revenues thinning away. However, the overall impact is likely to be minimal.

U.K.-based crypto enthusiasts can still trade the actual digital currencies. At the same time, those interested in trading complex crypto financial instruments such as derivatives might indulge in dealing with offshore exchanges.

It’s also worthy of note that the ban on crypto derivatives is only limited to retail investors. According to the regulator, professional investors were not barred from trading crypto derivatives partly because they “have a greater understanding of the risks and greater capacity to absorb potential investment losses.”

In an email sent to Coindesk, Don Guo, CEO, Broctagon Fintech Group, said:

“Those still keen on trading crypto derivatives will just find ways to open accounts in unaffected regions. There is a stark risk that retail traders will simply trade on unregulated exchanges, which in fact puts them at more risk.”

In another statement, IG Group told Coindesk:

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

Cryptocurrencies Popular in the U.K.

Earlier this year, the FCA published thorough research that hints toward the growing popularity of digital currencies in the U.K.

According to the report, almost 4 percent of the U.K.’s general population currently owns cryptocurrencies.

Perhaps it is no surprise that the U.K.’s receptive attitude has been an important factor encouraging crypto exchanges to expand their operations in this budding crypto market.

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