The World Federation of Exchanges (WFE), an international body representing over 70 financial exchange operators, has advised the U.K Financial Conduct Authority (FCA) against a proposed move to ban the sale of crypto derivatives to retail investors.
The WFE revealed their stance on the proposed ban in a press release published Monday and accompanied it with recommendations on how the FCA can effectively regulate the emerging crypto derivatives market while at the same time ensuring adequate protection for retail investors.
Noteworthily, the FCA had identified, among other things, price volatility and the “poor conduct of UK and EEA firms offering a crypto-related contract for difference (CFD) to retail consumers,” as their reasons for considering a ban on such products.
However, the WFE wrote as part of its recommendations that the FCA should give due consideration to the underlying market structures such as the structure of established, fully regulated exchanges and central counterparty clearing houses (CCPs) offering these crypto derivatives products to retail investors.
They also advised the FCA to be wary of the “unintended consequences” that could come from trying to transfer rules that apply to traditional derivatives products to the new crypto-related derivatives.
Conclusively, the WFE stressed the importance of the FCA defining standards for crypto derivatives and also urged the regulator to review a ban if it eventually decides to go down that path.
We ask that authorities, including the FCA, chart the right regulatory course to allow the market to flourish and benefit its consumers even as we understand that it’s a balancing act.
WFE CEO Nandini Sukumar said in the announcement.