Authorities in the United Kingdom are disagreeing on whether it is appropriate to ban the sale, marketing, and distribution of derivatives and exchange-traded notes (ETNs) linked to cryptocurrencies.
The ban was implemented in January 2021 by the Financial Conduct Authority (FCA), the top British regulator. Since that time, businesses are no longer permitted to provide retail clients with bitcoin derivative products including futures, options, and exchange-traded notes (ETNs).
Despite 97% of responses to the FCA’s consultation rejecting the “disproportionate” restriction and many stating that ordinary investors are capable of evaluating the risks and value of crypto derivatives, the blanket ban was nonetheless implemented.
The Regulatory Policy Committee (RPC), an advising public body supported by the Department for Business, Energy, and Industrial Strategy of the government, presented its arguments against FCA’s restriction on January 23.
The RPC estimated yearly losses from the policy at around 268.5 million British pounds ($333 million) using the cost-benefit analysis.
According to the RPC, the FCA didn’t make it clear what would exactly occur if the restriction weren’t in place. Additionally, it left out a description of the calculations and methods used to assess the costs and benefits at the time. In light of this, the RPC assigns the ban a “red” rating, indicating that it is unfit for purpose.
Legislation may not always be directly reversed as a result of the RPC’s unfavorable evaluation. However, considering the committee’s connections to the Department for Business, Energy, and Industrial Strategy, it could indicate that the FCA and the government have differing views on what constitutes a legitimate regulation.
The British financial authorities took a number of important steps to promote the growth of the digital economy last year. For instance, a list of investment transactions that meet the requirements for the Investment Manager Exemption contained “designated crypto assets.”
