Facebook X (Twitter) LinkedIn Telegram
    • About
    • Advertise
    • Submit Press Release
    • Contact
    Facebook X (Twitter) LinkedIn Telegram
    BlockonomiBlockonomi
    • Prices
      • All Coins
      • Bitcoin Price
      • Ethereum Price
      • Ripple Price
      • EOS Price
      • Litecoin Price
      • Monero Price
      • Binance Coin Price
      • Bitcoin Cash Price
      • Chainlink Price
      • Cardano Price
      • Stellar Price
      • Tron Price
    • Sections
      • All
      • Analysis
      • Bitcoin
      • Ethereum
      • Education
      • Trading
      • Buying
      • DeFi
      • NFTs
      • Metaverse
      • Exchanges
      • Brokers
      • Guides
      • Gaming
      • Privacy
      • Business
      • Finance
      • Fintech
      • Regulation
      • Security
    • Claim Free Crypto!
    • Gamble With Crypto!
    • Easily Buy Crypto!
    Home / About / Advertise / Submit Press Release
    BlockonomiBlockonomi
    News

    UK’s FCA to Consider Tighter Regulations for Crypto Derivatives

    Nicholas SayBy Nicholas SayOctober 31, 2018No Comments4 Mins Read
    Telegram Twitter LinkedIn WhatsApp Facebook Email
    FCA Crypto Derivatives
    Share
    Facebook Twitter LinkedIn Email Telegram WhatsApp

    The UK’s financial regulator, called the Financial Conduct Authority (FCA), may be looking to boost regulations on cryptocurrency-based derivative contracts. The Financial Times reported that the agency is worried about the leverage being used in the contracts, which generally exceed the amount present in normal cryptocurrency trading activity.

    The report comes in the wake of the Cryptoassets Taskforce most recent report, which raised concerns about the profits that were flowing from UK based trading operations. The Cryptoassets Taskforce includes representatives from the U.K. Treasury, the Bank of England and the FCA.

    FCA Crypto Derivatives

    Cryptocurrency derivative contracts are apparently a popular way for speculators to gain exposure to the often volatile cryptocurrency markets. Unlike buying or selling a crypto on an exchange, derivative contracts often convey no ownership of the underlying asset. This makes them essentially worthless, and totally reliant on the counterparty to retain value.

    The FCA is Worried

    Table of Contents

    • The FCA is Worried
    • Are Cryptos That Different?
    • A Tiny Market

    The FCA has jurisdiction over financial derivatives, like futures, options, and contracts for difference (CFDs). Any group that is trading in these securities has to have approval from the FCA, and follow the guidelines that it sets for the market. What they view as excessive leverage has prompted them to launch a consultation into cryptocurrency derivatives that is scheduled to begin in the first quarter of 2019.

    What Are Derivatives?

    What Are Derivatives? And How do they Relate to the Cryptocurrency Market

    According to the Cryptoassets Taskforce report, London-based brokers like IG Group and Plus500 have been pulling a lot of profit from cryptocurrency derivatives. The investors who get involved in these trades may or may not understand the nature of the market for derivatives. Using large amounts of leverage will create bigger gains if a trader is correct, but if they aren’t, their losses could greatly exceed the initial capital they invested in the position.

    Are Cryptos That Different?

    The FCA is planning to look into whether or not additional regulations are needed in the sector, and if they should enact a three-level scheme to classify crypto assets. The new system would see assets broken up based on how they are to be used, with speculative assets like derivatives in a separate class from means of value exchange.

    The Financial Times quoted Iqbal Gandham, who is the CryptoUK chair, as saying he was “pleased” by the initiative, but he went on to emphasize that, “(it) is important that new rules are proportionate and do not put up excessive barriers, including for retail investors.”

    The FCA issued a statement that, “made clear that in its view cryptoassets have no intrinsic value and investors should therefore be prepared to lose all the value they have put in,” which in their view demonstrates their, “potential future threats to stability.”

    A Tiny Market

    If the crypto space is small, the market for cryptocurrency derivatives is minuscule. The real concern for the FCA, and regulators at large, is one of industry practices. The difference between an option or CFD that is written on oil futures or Bitcoin is only the volatility of the underlying asset. There is no fundamental difference other than price movement.

    When it comes to the potential for cryptocurrency derivatives to disrupt systemic stability, it is hard to imagine a scenario where Bitcoin CFD’s meaningfully impact the banking system. The current trend up in the 3-month LIBOR rate is a far more pressing issue for major banks and corporations. Every basis point that LIBOR creeps up means literally billions of dollars more that needs to be paid in interest, on a global scale.

    The higher-than-average profits that online brokers are receiving are probably a result of underinformed investors, who are looking for big profits in a popular asset class. Most people who trade in the existing commodities understand that taking on 100x leverage isn’t a safe idea, but for punters with dreams of Bitcoin billions, it may seem like a smart move.

    Advertise Here
    Nicholas Say
    • LinkedIn

    Nicholas Say was born in Ann Arbor, Michigan. He has traveled extensively, lived in Uruguay for many years, and currently resides in the Far East. His writing can be found all over the web, with special emphasis placed on realistic development, and the next generation of human technology.

    Related Posts

    EOS Network – An Enterprise-Grade Blockchain Operating System

    November 29, 2023

    Former OneCoin Compliance Chief Pleads Guilty to Fraud and Money Laundering

    November 10, 2023

    After The SBF Verdict, Where Does the Crypto Market Go Next?

    November 4, 2023

    Comments are closed.

    Coinbase Earn
    Advertise Here
    Gambling
    • mBit Casino
      VisitReview
    • BC Game
      VisitReview
    • Duelbits
      VisitReview
    • BitcoinCasino
      VisitReview
    • FortuneJack
      VisitReview
    • 1xBit
      VisitReview
    Exchanges
    • KuCoin
      VisitReview
    • Coinbase
      VisitReview
    • Binance
      VisitReview
    • PrimeXBT
      VisitReview
    Koinly
    Advertise Here
    Trading Bots
    • 3Commas
      VisitReview
    • Cryptohopper
      VisitReview
    • CoinRule
      VisitReview
    3commas Trading Bot
    Advertise Here
    All content on Blockonomi.com is provided solely for informational purposes, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate.
    Blockonomi™ Copyright © 2017 - 2023 Kooc Media Ltd. All rights reserved. Registered Company No.05695741
    Network: Moneycheck - Finance News / Beanstalk - NFT & Metaverse News
    • About
    • Contact
    • Deals
    • Advertise
    • Privacy Policy
    • Terms & Conditions

    Type above and press Enter to search. Press Esc to cancel.