Policymakers in the United Kingdom are divided over whether the sale, marketing and distribution of derivatives and exchange-traded notes (ETNs) linked to cryptocurrencies should be banned when it comes to retail investors. The Regulatory Policy Committee is of the view that the measure adopted in 2021 is unjustified in the present circumstances.
The ban is enforced by the Financial Conduct Authority (FCA), the chief UK regulator. Entered into force in January 2021.. From that point on, companies could no longer offer cryptocurrency derivative products such as futures, options and exchange-traded notes, or ETNs, to retail customers.
Back in time, the blanket ban 97% of the respondents were ignored. For the FCA’s own consultation, which opposed the FCA, proposed a “disproportionate” ban and argued that retail investors are able to assess the risks and value of crypto derivatives.
On January 23, 2023, the Regulatory Policy Committee (RPC), an advisory public body, under the auspices of the Government’s Department for Business, Energy and Industrial Strategy, put out His reasons against the FCA’s prohibition.
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Using a cost-benefit analysis, the RPC estimated the annual loss from the measure to be approximately $333 million (268.5 million British pounds). As the Committee points out, the FCA did not provide a clear explanation of what would happen specifically in the absence of a prohibition. It also did not explain the methodology and calculations for estimating costs and benefits at that time. On this basis, the RPC rates the prohibition at the “red” level, which means it is not fit for purpose according to the review.
An adverse review by the RPC does not necessarily lead to a direct reversal of the legislation. However, given the committee’s ties to the business, energy and industrial strategy sector, this may mark a different understanding of the FCA and the government’s reasonable regulation.
Last year, the British financial authorities made several important efforts to promote the growth of the digital industry. For example, “designated crypto-assets” were included in the list of investment transactions that Investment Manager Exemption.
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