EU markets watchdogs strengthen rules on crypto derivatives

There are new rules on cryptocurrency trading exchange in Europe. The European Securities and Markets Authority (ESMA) has reinforced its stance in the cryptocurrency derivative contracts.

The EU markets watchdog made an announcement on Tuesday stating that it has agreed to adjust the leverage restriction for all cryptocurrency-related CFDs or contracts for difference. This move will require that all retail investors pay the initial sum of at least fifty percent of the full CFD value.

With the contracts for difference, one party will pay the other party where the value of the asset changes. This policy was adopted after the public consultation by the agency in January. The argument was that volatility of cryptocurrencies poses serious concerns for the retail investor and they needed protection.

With the first leverage at 5:1, implying that investors can pay a meager twenty percent of the full CFD value – the agency had introduced a lower leverage limit of 1:1 or 2:1. It may even ban marketing, distribution or sales of the products totally.

In the announcement made today, the ESMA showed that cryptocurrency trading exchange is still the main concern and the body may consider stricter measures in the near future to protect the investors.

In the statement, the regulator said:

[perfectpullquote align="full" bordertop="false" cite="" link="" color="" class="" size=""]“Due to some specific features of cryptocurrencies as an asset class, the financial instruments market offering exposure to cryptocurrencies like CFDs will now be monitored closely. Also, ESMA will examine the process to determine when there will be a need for stricter measures.”[/perfectpullquote]

The new measures were introduced at a period when the crypto market is experiencing a rise in interest from the retail investors. Dealers and brokers have also responded well to the new demand for products.

For example, a few days ago, Dukascopy, the Swiss bank and securities dealer announced that the company is currently offering US dollar/bitcoin CFDs via its retail accounts. It also has plans in the future to offer sales and purchase of underlying cryptocurrency assets.