LONDON, Oct 6 (Reuters) - Britain's financial watchdog said
on Tuesday it would ban the sale to retail investors of products
tracking the price of cryptoassets like Bitcoin, arguing that
most people lost money on them.
The Financial Conduct Authority (FCA) said there was no
reliable basis for valuing cryptoassets that underpin
derivatives and exchange-traded notes.
The ban, which prompted surprise and anger in the sector,
will come into force on Jan. 6, 2021.
Shares in Plus500, IG and CMC
fell by between 1% and 3.6% after the FCA published its
statement on the ban.
"Many will think it is not necessary - there are already
material leverage restrictions related to this form of trading
and this appears quite 'nanny state'," lawyers at Ashurst said.
The watchdog had set out proposals for a ban in a public
consultation last year, and said on Tuesday the move would save
retail investors 53 million pounds ($69 million).
There is a prevalence of market abuse and financial crime,
along with extreme volatility in prices, and lack of legitimate
need to invest in such products, the FCA said.
"Significant price volatility, combined with the inherent
difficulties of valuing cryptoassets reliably, places retail
consumers at a high risk of suffering losses from trading
crypto-derivatives," said Sheldon Mills, interim executive
director for strategy and competition at the FCA.
"We have evidence of this happening on a significant scale."
Global Digital Finance, an industry body that promotes best
practices and conduct standards in cryptoassets, said the
"drastic" move singled out cryptoassets unfairly.
"This ban kills off what could have been a new investment
opportunity for sophisticated retail investors. It also sends a
negative signal regarding the UKs stance on cryptoassets," said
Lawrence Wintermeyer, executive co-chair of Global Digital
The products were popular with young male investors in
particular, the FCA said, noting that most respondents to its
consultation had opposed a ban, arguing that cryptoassets have
intrinsic value and some like Bitcoin are accepted by companies
such as Starbucks and Microsoft as a form of
"We remain of the view that the price of cryptoassets is
determined by sentiment and speculative behaviour," the FCA
($1 = 0.7714 pounds)
(Reporting by Huw Jones; Editing by Susan Fenton and Sujata