Financial Conduct Authority Issues Warning Against Crypto Derivatives

UK Finance Watchdog Issues Warning on Crypto Derivatives

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  • The UK Financial Conduct Authority issued a warning against cryptocurrency derivatives
  • It says bodies who want to offer cryptocurrency derivatives must first seek permission.

United Kingdom: The Financial Conduct Authority, which acts as the financial watchdog for the UK, has issued a warning to all firm offering crypto derivatives products that they “likely” needed to obtain permission from FCA before operating. On Friday, the FCA released a statement on its site, which states that though the agency does not consider digital currencies as currencies or commodities that require regulations under its jurisdiction, it considers crypto derivatives as financial instruments for regulatory purposes.

According to the statement:

“Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable European Union regulations.”

The Financial Conduct Authority stated further that firms offering/or seeks to offer token or crypto derivatives are “likely” to obtain permission first from the agency and be permitted before operating. The cryptocurrency derivative products quoted by the FCA include crypto options, crypto contracts-for-differences (CFDs), and crypto futures.

However, the Financial Conduct Authority added that an Initial Coin Offering:

“may or may not fall within the FCA’s regulatory purview depending on the nature of the tokens issued.”

The statement ended with a warning that reads:

“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.”

Though the Financial Conduct Authority took a positive stance towards the blockchain tech, stating back in 2016 that it has no mind of regulating the blockchain industry because it needs “space” to grow, for now, the agency has taken a stricter position on Initial Coin Offerings and digital currencies.

Andrew Bailey, FCA’s head, last December issued a warning to all crypto investors that they could possibly lose all their funds if they invest in Bitcoin, likening crypto trading to gambling.

The European Union through its financial watchdog, ESMA, took a similar stance by toughening its rules on crypto derivative contracts late last month.


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