Politicians in the United Kingdom are divided over whether the sale, marketing and distribution of derivatives and exchange-traded bonds (ETNs) associated with cryptocurrencies should be banned when it comes to retail investors. The Regulatory Policy Committee considers the measure taken in 2021 to be unjustified in the current circumstances.
The main UK regulator, the Financial Conduct Authority (FCA), introduced the ban in January 2021. Since then, companies can no longer offer cryptocurrency derivatives such as futures, options, and exchange notes or ETNs to retail customers.
The outright ban was implemented despite 97% of FCA consultation respondents opposed a “disproportionate” ban, with many arguing that retail investors are capable of assessing the risks and costs of crypto derivatives.
On Jan. 23, the Regulatory Policy Committee (RPC), a government advisory body sponsored by the state Department of Business, Energy and Industrial Strategy, laid out its case against the FCA ban.
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Using a cost-benefit analysis, the RPC estimated the annual cost of the measure at around 268.5 million British pounds ($333 million). According to the RPC, the FCA has not provided a clear explanation of what exactly will happen in the absence of a ban. It also did not explain the methodology and calculations for estimating costs and benefits at the time. On this basis, the RPC evaluates the ban as “red”, which means that it does not fit the purpose.
A negative review by the RPC does not necessarily lead to an outright repeal of the legislation. However, given the committee’s links to the Department of Business, Energy and Industrial Strategy, this could mean a different understanding of prudent regulation by the FCA and the government.
Last year, the British financial authorities made a number of significant efforts to develop the digital industry. For example, “designated crypto assets” have been included in the list of investment transactions that are subject to the investment manager exemption.