UK’s FCA issues Warning on Crypto Derivatives

UK’s FCA issues Warning on Crypto Derivatives

In an April 6th announcement, The Financial Conduct Authority notified firms that they will likely require authorization via licensing if they wish to offer cryptocurrency derivatives. This is likely to include tokens issued through ICO.
Cryptocurrency futures, cryptocurrency contracts for differences (CFDs), which the FCA released a statement about in late 2017, and cryptocurrency options are the target of the new regulations.
Recently the FCA warned that there is a high risk of being scammed in speculative crypto investing, and urged citizens to use ScamSmart, the FCA’s educational tool, to help investors protect themselves.
The FCA has issued previous statements on the volatile nature of cryptocurrency and the risk of total loss of your initial investment.  This announcement however, had a more stern tone and warned that firms not in full compliance can face penalties.

“If your firm is not authorized by the FCA and is offering products or services requiring authorization it is a criminal offence. Authorized firms offering these products without the appropriate permission may be subject to enforcement action.”  

The statement made this week also advises firms that it is their own responsibility to ensure they are working within the law.
This announcement follows a series of moves made to scrutinize cryptocurrencies and their respective markets.  In March, Chancellor Philip Hammond announced the launching of a task force to investigate cryptocurrency and its risks and benefits.
The task force is made up of the FCA working alongside the Bank of England, who’s governor one time referred to Bitcoin as a bubble and said that cryptocurrency grows by “finding the greater fool.”
The FCA has not been exactly clear in regards to cryptocurrency regulations, but it seems to be more concerned with curbing speculation than having a negative impact on the actual technology.  
The statement released by the FCA on April 6th, restates that cryptocurrencies themselves are not currently regulated; so, most exchanges and companies that deal with blockchain technology will be unaffected by these new rules.  
While further scrutinizing cryptocurrency and levying harsher rules on its markets, Hammond stated that he would like to make the U.K. as attractive as possible to the broader Fintech world. Curbing speculation may benefit cryptocurrency in the long run.
 It could cause the price to stabilize and add a sense of legitimacy which could ultimately help the technological sector of crypto gain traction, but it could also slow the growth of cryptocurrency in general in the short term.

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