Industry Updates

Industry bemoans FCA’s decision to ban crypto ETN sales to retail consumers

Ban to be introduced in January 2021

George Geddes

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The crypto industry has responded to the Financial Conduct Authority’s (FCA) decision to ban the sale of crypto-derivatives, including exchange-traded notes (ETNs), to retail consumers from January 2021.

The UK watchdog deems these types of products as ill-suited for retail investors due to the potential risks they pose.

Crypto ETP provider CoinShares argues the ban will not stop retail investors from using these products but rather drive them to unregulated exchanges.

Some of the features of these products which have resulted in this decision include no reliable basis for the valuation of the underlying assets, extreme volatility in crypto price movements and inadequate understanding of cryptoassets by retail consumers.

In a statement announcing the ban, the FCA said: “Unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as bitcoin, ether or ripple.”

The FCA has banned the selling, marketing and distributing to all retail investors of any derivatives, such as contract for differences, option and futures, as well as ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.

Instead of deterring investors from using such products, CoinShares believes retail investors will just seek to trade such products on unregulated exchanges and be exposed to greater risk.

The issuer said: “These unregulated crypto exchanges have far fewer protections than the regulated ETNs offered by CoinShares and other providers.”

CoinShares was involved in the FCA consultation process and had several meetings with the regulator to dissuade the banning of ETNs.

“We see the FCA ban as further evidence that the UK is turning its back on innovation in digital assets and on regulatory coordination with other jurisdictions,” the firm continued. “It remains the only Western jurisdiction to ban digital assets based on the false belief that they have “no intrinsic value."

Why the UK remains years not months off a crypto ETP

Nigel Green, CEO and founder of deVere Group, argues the FCA should be regulating and booming the sector rather than banning the sale of products based on their prices.

“This move by the FCA underscores the regulator’s rather misguided approach to cryptocurrencies,” commented Green.

“In this regard, most major financial institutions globally already have or are preparing to establish crypto desks. It is why more and more retail and institutional investors are piling into the market and it is why tech giants, like Facebook, amongst others are getting involved.”

In August, CoinShares saw its crypto ETP range balloon to $1bn in assets under management following significant price rallies.


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