Financial Conduct Authority (FCA) of the UK had last week announced to impose a ban after the end of the year 2020. FCA has decided to impose a ban on the sale, purchase, and transfer of crypto derivatives within the UK. It is proposed that the ban will be implemented on the 6th of January, 2021. Necessary instructions have been issued to centralized and decentralized crypto exchange firms nationwide to ensure compliance with the directions.
The reason behind imposing a ban is that FCA thinks that the crypto derivatives are a kind of fraud. FCA told in the press release that every year at least GBP 58 Million is lost in crypto derivatives. This causes a loss to UK consumers and it is the responsibility of FCA to protect its consumers, said FCA.
Crypto derivatives are crypto byproducts that can be bought by consumers by paying cryptocurrencies. FCA explained that there are certain reasons why crypto derivatives are bad for the consumers. It said that these derivatives are inherently flawed and their values cannot be determined reliably. It also said that they are developed in a way that they attract cyber criminals. A huge number of consumers do not understand them but buy them on somebody’s insistence. In some cases there were many who borrowed money to buy them and got scammed, said FCA.
However, the decision of banning crypto derivatives was heavily criticized by crypto investors. Firstly they thought that even the trade of cryptocurrencies was also banned. However keeping in view the growing concerns of the business community within the UK, FCA issued a clarification.
In the clarification, FCA has clarified that no ban is being imposed on the sale, purchase or trade of cryptocurrencies. No particular cryptocurrency is being banned, it said. The only exception is that the sale, purchase, and trading of crypto derivatives have been banned. Anyone holding crypto derivatives before the implementation of the ban will not be subjected to any penalty, said FCA.
Crypto investors in the UK thought that the authority has banned the trading of Bitcoin and other cryptocurrencies. However, the clarification coming out from FCA lifted the swirling mist.