The British ban on crypto derivatives does not protect private investors

The evaluation of cryptocurrencies has increased dramatically in the past 12 months, as well as their acceptance by investors all over the world - individuals and institutions.

Until a few years ago, most small investors would have needed the use of a broker or investment expert to handle their systems. Today, consumers flock to apps and platforms that enable them to invest directly and without intermediate traders in both traditional financial systems and increasingly in crypto.

as a sign of how accessible digital assets have also become for private customers, the US regulatory authorities approved the country's first crypto derivative ETF for Bitcoin, the most popular digital currency, last month. During the approval, civil servants followed their counterparts in such different jurisdiction as Canada, Germany, Dubai and Brazil.

And where is Great Britain with all of this? The answer is left behind. Far from gaining good access to crypto products under the security roof of a strict regulation, the Financial Conduct Authority states far from the global efforts, which prohibits the sale of crypto derivatives to private customers in January.

Instead of strengthening the Great Britain's position as a global financial center, an excessive careful handling of crypto limits the ability to open up a share of this rapidly growing revolutionary market

This has to change. The restrictions do not really work because investors can still buy such derivatives abroad or on detours outside the control of the supervisory authorities. Investor protection is not improved by the measures, but endangered.

Instead of strengthening the Great Britain's position as a global financial center, an excessive careful handling of crypto limits the ability to open up the UK's ability to share this rapidly growing revolutionary market.

It is certainly correct that the FCA focuses on investor protection and is concerned that a market that has developed so quickly harbors dangers for investors. But she has to adapt her clumsy approach to a more flexible policy that can still offer investors the required level of security.

After Brexit, Great Britain is strategically positioned in order to take on a proactive attitude when introducing cryptocurrencies in retail, but instead chose a "waiting" approach and constantly expressed concerns about consumer protection, which at times did not match his own investigations.

The British Financial Conduct Authority (FCA) has published a survey this year, in which it was found that the majority of the owners of crypto-assets generally know about the product, is aware of the lack of regulatory protection and understand the risk of price volatility.

When the FCA announced its ban on selling crypto derivatives to private customers in January, she said that "small consumers and the risks of derivatives such as difference contracts (CFDS), futures, options and listed securities cannot assess reliably". Notes (ETNS) that refer to certain crypto assets ". The reasons of the FCA included concerns that consumers had no" reliable basis for evaluation "and private customers had an" inadequate understanding and no clear investment needs ".

Here is an obvious contradiction between this statement and the own survey of the FCA.

The decision of the regulatory authority was largely considered unnecessarily careful by the industry - which advocated a more balanced approach with protective measures such as an upper limit for the debt. It is difficult to understand who this decision has protected, since British customers can still open offshore accounts that offer trading with derivatives with up to 100 times leverage.

I think most do this with open eyes. Small investors who get into the complex world of crypto and digital assets have to "investigate". And many do this.

The ban on FCA derivatives strangely does not seem to be in line with the historical successes of the UK as a fintech hub and the commitment of the government to be competitive and innovative jurisdiction for financial services. Even in the EU, which is often seen as a bureaucratic monster in Great Britain, which is slowly keeping up with the financial pioneering role, there are no similar bans. Neither in the USA nor in most parts of Asia.

The step of the US authorities in the past week only underlines how isolated Great Britain threatens to become. In fact, the US Commodity Futures Trading Commission has been supervising the regulated markets for crypto derivatives with products that offer a reliable basis for evaluation for almost three years. These markets are accessible to both private investors and professional investors.

In a welcome development, the British government has advised on proposals to bring the promotion of certain types of crypto-assets into the scope of existing rules-in an obvious effort to increase the flow of information and transparency.

The regulatory authority recently launched a new “InvestMart” campaign, which is intended to help consumers make more and more investigated investment decisions and to create risk awareness, especially among younger crypto investors.

The FCA also examines the possible admission of crypto-assets in the "High Risk Investment" category, which is available to be wealthier and well-advised investors. This includes other assets such as not immediately sellable securities, peer-to-peer agreements and speculative illiquid securities.

Cryptouk works closely with the FCA and supports initiatives that aim to educate consumers in risk assessment and highlighting crypto -specific investment nuances.

However, there is a balanced relationship between the protection of the weak and the recognition of the growing demand for regulated crypto products by well -informed private investors.

Despite the regulatory obstacles, the appetite of British private customers continues to grow on crypto. The FCA estimates that the number of consumers who have cryptocurrencies rose to 2.3 million in the 12 months until June 2021 - from 3.9 percent to 4.4 percent of adults in Great Britain.

We should find a regulatory balance for crypto investments that significantly reduces the risk, but not least the opportunity to create considerable prosperity.

Ian Taylor is director of Crypto UK, an industry association