• The FCA has announced a ban on cryptocurrency derivatives and ETNs being sold to retail investors
• The ban will come in from January 2021
• 97% of respondents to the consultation opposed the proposal
Laith Khalaf, financial analyst at investment platform AJ Bell, comments on the FCA’s latest cryptocurrency announcement:
“The FCA has delivered a blow to the crypto world, despite almost all the respondents to its consultation opposing the proposals. That’s perhaps to be expected, given those most likely to share their views were providers of crypto products with more than a little skin in the game.
“On balance, given how new these markets are, how instinctively appealing they can be to the younger generation and the potential for fraudsters and cowboys to muscle in on the act, it’s understandable the FCA wants to play it cautiously.
“Crypto fans will no doubt point to the huge financial distortions that have occurred in bond and currency markets as a result of quantitative easing, and question why cryptocurrency is being carved out for specialist treatment.
“Likewise, the argument that crypto is not a proper medium of exchange could be equally levelled at gold. You can’t pay for your Starbucks coffee with gold, yet products are available to investors from no less than the Royal Mint.
“History is important though and gold has that in spades, having been used as a measure of value for hundreds of years, and indeed used to underpin national currencies like the dollar and the pound. In time cryptocurrencies may mature into a more mainstream asset class, but after a burst of popularity in late 2017, when the price of Bitcoin briefly flirted with the $20,000 mark (it now sits around $10,700), crypto is facing a regulatory backlash.”
