CoinShares Reveals its Take on FCA’s Ban of Crypto Derivatives

The online trading community continues to receive responses to FCA’s new rules banning the sale of derivatives related to certain types of crypto-assets to retail consumers.

While it is not unusual to see a company or an industry association exhort its members to help lobby on legislation, CoinShares has taken it one step further by enlisting its customers to take action against FCA’s crackdown.

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The cryptoasset investment and research platform today said it clearly disagree with the City watchdog’s ban on the sale of crypto-based derivatives due to what it considers the prevalence of market abuses and that underlying assets had “no reliable basis for valuation”.

The ban will come into effect on January 6, 2021 and affects CFDs, options and futures – as well as exchange traded notes (ETNs) that relate to unregulated cryptoassets.

Coinshare’s derivatives have had a very successful year much like the rest of the cryptocurrency economy. Its product Bitcoin Tracker One (COINXBT:SS) yielded nearly 40 percent in year-to-date return.

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The FCA estimates the prohibition would save investors £53 million ($69 million) a year in losses, but it wouldn’t force them to liquidate their existing trades. However, CoinShares said the ban will not result in such savings or benefits; rather, it will only drive UK retail investors to unregulated crypto exchanges that offer far fewer protections.

CoinShares said it had several meetings with the FCA to dissuade them from banning crypto-related ETNs to UK retail investors. Using a ready template on its website, CoinShares urged its clients last year to swap out their personal details and submit a version of this response to the regulator via email.

“We see the FCA ban as further evidence that the UK is turning its back on innovation in digital assets and on regulatory coordination with other jurisdictions. It remains the only Western jurisdiction to ban digital assets based on the false belief that they have “no intrinsic value,”  it further states.

Coinshares already operates publicly traded crypto exchange-traded-notes (ETNs), which are regulated by the Swedish FSA and the company says they offer retail investors more “familiar channels” to invest in the growing digital asset economy.

The firm says it plans to expand in other jurisdictions but still has a lot of work to do regarding dealing with regulators investigating digital assets.

The FCA, however, considers these products are “ill-suited to retail consumers” who cannot assess the risks of derivatives or ETNs that reference certain crypto-assets.

The company also reassured their investors that it will continue to operate their products as normal. CoinShares indicated that it operates a broadly diversified business spanning across many jurisdictions. As a result of this diversification across business lines and geographies, the company does not expect the anticipated changes to regulation to have a material adverse effect on its overall offering.

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