UK Regulator Calls Crypto Derivatives Dangerous
The financial regulator of the United Kingdom considers putting a ban on certain crypto derivatives, Finance Magnates reports.
In particular, the organization is planning to ban access to contracts for difference (CFDs) for retail investors. Such contracts serve as a tool for making a speculative profit on stock market fluctuations while there may be no real assets involved in the transaction.
The Financial Conduct Authority (FCA) believes that such financial products compromise the market integrity due to high volatility of digital assets.
According to Christopher Woolard, the head of the FCA's strategy and competition, users should be protected from crypto CFDs, since this is a rather complicated and volatile derivative. Moreover, financial operations with cryptocurrencies are often opaque and can be exploited for fraud and money laundering.
Woolard stated that by the end of 2018 FCA will provide guidance to financial companies. It is assumed that the regulator may also prohibit other cryptocurrency related derivatives — options, futures, and securities.
Thus, the British Financial Conduct Authority will try to respond to the “most comprehensive” global challenge and prevent cryptocurrencies from being used in illegal activities, Woolard added.
Previously, a former trader tried to explode a London-based crypto exchange after it refused to change his wallet password.