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The FCA has been banning CFDs on cryptocurrencies from January 2021

The FCA has been banning CFDs on cryptocurrencies from January 2021

created Michał SielskiSEPTEMBER 7, 2020

It didn't take long for the first controversial decision FCA after the British regulator became independent from its European regulator, i.e. ESMA. In Great Britain, from October 6.10.2020, XNUMX, it will not be possible to sell, among others, contracts for difference (CFDs) for cryptocurrencies.

Brexit is long behind us, and its effects on individual sectors will be felt for a long time. Sometimes they will be negative, some will be positive, but most of them will be surprising. The latter group certainly includes the latest decision by FCA, the British regulator, which no longer has to copy the provisions of the European ESPA regulator. And it does not copy, and even goes a step further. The UK regulator announced that it is banning the sale of derivatives which refer to certain types of cryptocurrencies to retail consumers. The ban applies to cryptocurrency exchange quotes (ETN) and contracts for difference (CFDs). It will enter into force on January 6, 2021.

Further restrictions on the cryptocurrency market

The changes in FCA are not the first limitations of the dynamically developing cryptocurrency market. The first took place in 2018 when the cryptocurrency CFDs leverage was limited to 2: 1 along with an overall reduction in the allowable leverage on CFD products sold to retail investors. Back then it was a joint FCA and ESMA initiative that limited the leverage to which Forex / CFD brokers allowed retail traders to a maximum of 30: 1 for major currency pairs and at lower levels for other CFD asset classes and cryptocurrencies. Now, however, the restrictions will be much greater. Why?

Check it out: Forex brokers offering trading on Bitcoin [List]

At FCA, they argue that CFD cryptocurrency trading has become a major and quite lucrative business for retail forex brokers, especially in times of high cryptocurrency volatility that happens quite often.

However, this can be quite a problem for at least some brokers, especially those whose revenues are largely based on the cryptocurrency market. You can see it right after the FCA announcement, after which the share prices of most brokers fell - including the largest ones, which include, among others, Plus500, IG Group and CMC Markets.

plus500 stocks

Broker stock chart Plus500 from the session on October 6, 2020

CFDs are complex instruments and involve a high risk of a quick loss of cash due to leverage. 82% of retail investors' accounts record losses as a result of trading CFDs at this supplier. Think about whether you understand how CFDs work and whether you can afford a high risk of losing money.

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About the Author
Michał Sielski
Professional journalist for over 20 years. He worked, among others, in Gazeta Wyborcza, recently associated with the largest regional portal - He has been present on the financial market for 18 years, he started on the Warsaw Stock Exchange when the shares of PKN Orlen and TP SA were just being introduced to the market. Recently, his investment focus has been exclusively on the Forex market. Privately, he is a parachutist, a lover of Polish mountains and a Polish karate champion.