FCA bans the public from Bitcoin and other cryptocurrency derivatives

Big players such as CoinShares had argued hard for retail trading to be allowed to continue but the FCA ruled it should be banned because of the inherent difficulty in reliably valuing the underlying asset and the prevalence of financial crime and market abuse in the market.

Extreme volatility in cryptoasset price movements and the lack of understanding of the products by ordinary retail investors were other reasons for it to be banned.

Analysts noted bigger trading platforms such as IG, Plus 500 and CMC only relied on crypto derivatives for one percent or less of their revenue.

Laith Khalaf, financial analyst at AJ Bell said: "The FCA has delivered a blow to the crypto world. But given how new these markets are, how instinctively appealing they are to the younger generation and the potential for fraudsters and cowboys to muscle in on the act, it's understandable the FCA wants to play it cautiously.

The move does not prevent people from buying and selling the coins themselves, only contracts for difference, options and futures and exchange traded notes.

Sheldon Mills at the FCA said: "Consumer protection is paramount here. Significant price volatility, combined with the inherent difficulties of valuing cryptoassets reliably, places retail consumers at a high risk of suffering losses from trading crypto derivatives.

"We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection."

He also warned the public to beware of crypto-derivative investment scams, which have become increasingly common, often marketed through the Internet and social media.

The outright ban would make it harder for scammers to persuade the public their products were legitimate.

Retail investors should save £53 million from the ban, the FCA said.
AJ Bell's Khalaf pointed out that crypto fans would argue that share and bond prices have been distorted by quantitative easing and central bank interest rate policies just as much as cryptos are warped by unpredictable external factors.

Hargreaves Lansdown offers retail investors access to crypto derivatives through the XBT bitcoin tracker on its platform. A spokesman said investors will still be able to invest until the rule comes into effect in January and will be able to retain their holding afterwards if they wished to.