the UK Financial Conduct Authority (FCA) issued a document, said the ban on the sale of encryption currency derivatives and exchange-traded note (ETN) to retail investors today officially take effect. The ban applies to all companies doing business in or in the UK.
FCA believes that these products are not suitable for retail investors. Because retail investors may encounter some problems that make them unable to determine the reliable value of the product, such as:
The price of cryptocurrency assets fluctuates greatly;
The inherent nature of the underlying assets, which means that they do not have a reliable basis for valuation;
Market abuse and financial crimes are widespread in the secondary market;
Retail investors have insufficient understanding of crypto assets.
According to previous reports from Mars Finance, FCA conducted a public opinion consultation as early as November 2018 to discuss whether to prohibit the sale of cryptocurrency derivatives to retail investors. By October 2020, the agency officially announced this ban.
The FCA stated at the time that “large price fluctuations, coupled with the inherent difficulties in evaluating crypto assets, make retail investors extremely likely to suffer losses from trading cryptocurrency derivatives. We have ample evidence to prove this. The ban provides appropriate Protection level."
It is reported that as a financial regulator, FCA is mainly responsible for supervising banking, insurance and investment businesses, including securities. Compared with FSA (British Financial Services Authority, an independent non-governmental organization), this institution has a lower tolerance for risks and is more inclined to take preventive measures instead of just watching the damage happen.