UK’s financial services authority thinks about banning derivatives trading with crypto-currencies

The British Financial Conduct Authority (FCA) is reportedly nearing a decision on whether the derivatives trade with Bitcoin and crypto-currencies should be prohibited.

As The Economist reported, is considering the UK’s leading financial authority, the Financial Conduct Authority (FCA), by the year 2020, a blanket ban on crypto-currency derivatives to retailers, to introduce. The proposal is already on the table, and the regulatory authority is expected to meet early next year its decision. The FCA says that she has an obligation to protect small investors, and estimates that people in the UK have lost during the fall from the beginning of 2018, 492 million dollars with a crypto-derivatives.

In addition, the FCA is the reason for the possible ban 4 simulation reasons:

• the “inherent nature” of Bitcoin and crypto is no reliable measurement basis is currencies
• the financial crime on the secondary market for crypto-currencies (Cyber-theft)
• the volatility of crypto-currencies
• a poor understanding of private clients for crypto-currencies and the Lack of a clear investment needs for investment products, which refer to this

These allegations, however, are mostly very questionable. The value of Gold, maybe Bitcoins next real Equivalent in the derivatives market, it is also rates in the first place by the public mood, the inflation and the interest rates of Fiat currencies, as well as the removal costs, the impact on supply and demand. Demenstsprechend the reasoning is that the value of Bitcoin is of the same variables. Not for nothing, Bitcoin is also referred to as “digital Gold”.

The second Argument seems to be fallacious gezogem. According to the data of the National Crime Agency in the UK, the losses due to financial crime amounts to around 190 billion pounds per year – roughly 170 Times more than the value of crypto-currencies around the world have achieved (about 1.7 billion Dollar).

Although crypto-Assets that have a extremely risky investment and a high level of volatility, says Jacqui Hatfield of the international law firm Orrick, that there is no legitimate reason, the derivatives trading of digital Assets to highlight.

This is a short-circuit reaction. Crypto derivatives are as risky as other derivatives.

What influence could have the decision of the FCA?

Meltem Demirors, Chief Strategy Officer of the London-based Digital Asset Manager CoinShares, noting how such a ban in the entire crypto could affect the Ecosystem.

Regardless of whether you take care of the investors ‘ access to crypto derivatives, this ban is bad for Bitcoin and the Ecosystem. The risk of contagion is clearly very real, that other regulatory authorities could copy the approach of the FCA.

In a letter to investors CoinShares adds,

We believe that the FCA has not supplied sufficient evidence to justify the proposed ban. Through your consultation, the regulatory authority takes little effort to prove their contentions, and instead, meanwhile, a “Cherry Pick”approach to illustrate your perception of crypto-assets, and the perceived damage.

The recent large decline in Bitcoin at the 24. September coincided with a cascading Liquidation of long positions on the stock exchanges for crypto-derivatives. Researchers from crypto quantum of the price volatility of Bitcoin tried, on 25. To understand September with On-Chain data.

After the recent price decline, the research team of crypto Quant on the basis of our On looked-Chain data to determine a possible cause. Although we have found no cause for the recent price movement, we found a correlation between BitMEX payouts and the time of the large price movement.

Featured Image: Piotr Swat | Shutterstock