The FCA initially announced the ban back in October 2020 following a year-long consideration of the matter. At that time, the FCA stated that crypto derivatives were ill-suited to retail investors who were at risk of incurring significant losses.
Ian Taylor, chair of the self-regulatory trade group CryptoUK, said:
“The regulator is clearly focused on consumer protection, and rightfully so. Derivatives allow for leverage — enabling investors to magnify their gains, but equally their losses. The FCA has raised concerns about retail investors being exposed to significant losses and volatility, that they may not fully appreciate.”
Nevertheless, Taylor faulted the FCA’s characterization of retail crypto derivatives investors as unsophisticated. The CryptoUK chair also noted that the FCA could have opted for stricter leverage limits similar to the restrictions placed on contracts for differences, rather than placing a blanket ban.
According to Cointelegraph, with the ban in place, crypto derivatives can no longer be included in individual savings accounts (ISAs), and self-invested personal pensions (SIPPs). Nonetheless, there are concerns that the move might push investors towards unregulated offerings in other jurisdictions that pose even greater risks to retail investors than the products previously on offer in the U.K.
At the time of the ban’s initial announcement, some critics of the decision pointed to possible negative implications for U.K. crypto adoption. Simon Peters, a crypto analyst at multi-asset investment platform eToro dismissed these fears and stated:
“In my experience working with our higher equity U.K. clients at eToro, most want to hold the actual crypto-asset rather than trading a derivative such as a CFD, as they recognize the utility of holding the underlying crypto asset.”