The World Federation of Exchanges (WFE) has faulted the reported plan by UK regulators to ban crypto derivatives. This message comes after UK’s top financial regulatory body revealed it had concluded deliberations on the matter and may ban trading on crypto derivatives from 2020.
Meanwhile, authorities in the UK say crypto scams continue to grow with millions of dollars stolen over the last 12 months. This increase in the spate of crypto fraud is also causing regulators to put exert greater pressure on the UK’s virtual currency market.
WFE Faults FCA Plan to Outlaw Crypto Derivatives
In a communique issued on Monday (October 7, 2019), the global umbrella body for exchanges advised the UK’s Financial Conduct Authority (FCA) against going forward with plans to ban crypto derivatives.
As previously reported by Blockonomi, the FCA is reportedly moving towards prohibiting the sale of crypto derivatives to retail investors. For the FCA, these investment instruments carry risks that everyday investors aren’t capable of navigating.
According to the WFE’s statement, the FCA should look for ways to balance financial innovation and investor protection. For the FCA, a complete crypto derivatives ban would negatively affect its members who already maintain strict compliance with financial regulations.
In places like Japan, regulatory authorities have sought to put investor-protective measures in place rather than enacting an outright ban on crypto derivatives.
Commenting on the matter, WFE chief Nandini Sukumar, declared:
“Consumer protection must be foremost when seeking to regulate new and innovative products. While crypto asset products have real potential, the market has suffered from unregulated providers distributing inappropriate products. We ask that authorities, including the FCA, chart the right regulatory course to allow the market to flourish and benefit its consumers even as we understand that it’s a balancing act.”
As part of its message to the FCA, the WFE which has more than 70 members including Intercontinental Exchange (ICE) and Nasdaq offered a few recommendations to the regulatory body.
Chief among these recommendations was a call to the FCA to review the possible ban to avoid market fragmentation. According to the WFE, there is the possibility that global regulations for crypto derivates emerge and a ban in the UK would see its market regress against the rest of the world.
Other members of the WFE include SIX Swiss Exchange, London Stock Exchange, Deutsche Boerse, and Australian Securities Exchange to mention a few.
$33 Million Lost to Cryptocurrency Scams in the UK
In a related development, the Financial Times, says victims of crypto scams in the UK have lost over $33 million in the last 12 months. Some of the fraudulent crypto investment schemes even utilize fake endorsements purportedly from celebrities.
According to reports, the spate of these elaborate virtual currency scams is prompting the FCA to increase its policing of the local cryptocurrency scene.
While the UK has no formal cryptocurrency regulations, the FCA does have jurisdiction over investment products built around digital tokens. Since October 2018, the financial watchdog has carried out 87 different investigations into crypto businesses in the UK — a 74% increase from the previous 12-month period.
Reports indicate that these investigations contain a full spectrum of inquiries both major and minor, into the activities of cryptocurrency businesses. The uptick in regulatory pressure falls within the emerging trend being observed across the globe as government authorities seek to impose more stringent laws on the emerging cryptocurrency landscape.