FCA bans the sale of crypto-derivatives to UK retail consumers as of January 2021

(UPDATED)

The Financial Conduct Authority (FCA), the UK's financial services regulator, has banned the sale of derivatives and exchange traded notes (ETNs) that reference certain types of crypto-assets to retail consumers. The ban came into effect on 6th January 2021.

The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. The FCA states that these products cannot be reliably valued by retail consumers for the following reasons:

• inherent nature of the underlying assets, which means they have no reliable basis for valuation;
• prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
• extreme volatility in crypto-asset price movements
• inadequate understanding of crypto-assets by retail consumers; and
• lack of legitimate investment need for retail consumers to invest in these products

This announcement will affect crypto-asset service providers' (including authorised DLT Providers in Gibraltar) ability to sell such products to UK based retail consumers.

If you want to find out more about how this might affect your business please reach out to us.