UK policymakers are divided on whether to ban the sale, trading and distribution of cryptocurrency-linked exchange-traded notes (ETNs) and derivatives to retail investors. The Regulatory Policy Committee considers that the measure, adopted in 2021, is not justified in the current circumstances.
Britain’s main regulator, the Financial Conduct Authority (FCA), imposed the ban in January 2021. Since then, companies They can no longer offer cryptocurrency derivative products, such as futures, options, and ETNs, to retail clients.
The general ban was imposed despite 97% of respondents to the FCA inquiry opposing the “disproportionate” ban, and many argued that retail investors are capable of assessing the risks and value of crypto derivatives.
On January 23, the Regulatory Policy Committee (RPC) – public advisory body financed by the Ministry of Business, Energy and Industrial Strategy – set out its reasons against the ban on the FCA.
Using cost-benefit analysis, the RPC assessed the annual losses from the measure at some £268.5 million (USD 333 million). As the RPC asserts, the FCA did not provide a clear explanation of what specifically would occur in the absence of the ban. Nor did it explain the methodology and calculations to estimate the costs and benefits at the time. On this basis, the RPC rates the ban at the “red” level, meaning it is not fit for purpose.
The RPC’s negative review does not necessarily lead to the direct repeal of the legislation. However, given the committee’s link to the Department for Business, Energy and Industrial Strategy, it may mark the different way of understanding prudent regulation by the FCA and the government.
Last year, the UK financial authorities made a number of significant efforts to encourage the development of the digital industry. For example, “designated crypto assets” were included in a list of investment transactions that are eligible for the Investment Manager Exemption.
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Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.