The United Kingdom Financial Conduct Authority (FCA) has effectively banned all crypto derivatives trading, via banning crypto futures, crypto options, and crypto-exchange traded notes (ETNs). Apparently this is the culmination of a year-long legal battle, where crypto firms tried desperately to prevent this decree, and ultimately failed.
The United Kingdom’s decision is not unusual. Indeed, in the United States crypto derivatives are effectively banned as well, which is why BitMEX is in such serious hot water right now. There are Bitcoin Futures and Options on the Chicago Mercantile Exchange (CME) and Bakkt, but these products are basically only available for large investors, and regular retail investors cannot access them.
The most notable aspect of the United Kingdom banning crypto derivatives is the motivation behind it. The FCA says that consumers do not adequately understand crypto derivatives, there is a lack of a legitimate need for these products, there is extreme volatility, that crypto derivatives have no basis for valuation, and that crypto derivatives are hackable.
First off, there is obviously a legitimate need for crypto derivatives considering how big the global crypto derivatives market is, and it is asinine for the FCA to flatly declare that there is no need for it. Also, the statement that crypto derivatives don’t have a reliable basis for valuation is ignorant, since the valuation is determined by the free market.
Beyond that, it is absurd for the FCA to say that crypto derivatives need to be banned because consumers don’t adequately understand them. It is false to say that consumers don’t have the ability to understand crypto derivatives, and honestly it’s quite condescending.
Overall, this FCA decision reeks of totalitarianism, and is a classic example of the government deciding what’s best for its citizens. There is nothing inherently wrong with crypto derivatives, nor anything criminal about them, and the FCA’s reasoning for banning crypto derivatives boils down to the government believing that citizens can’t make proper decisions for themselves.