The World Federation of Exchanges (WFE) has written to ask the UK’s Financial Conduct Authority (FCA) not to ban the sale of cryptocurrency derivatives to retail customers, though it acknowledges the watchdog’s need to support customers.
The FCA has recently opened a consultation regarding measures to protect investors looking to buy crypto-related futures, options and contracts for difference.
The regulator proposed a full ban of crypto-derivatives, writing that it considers the products to be ill-suited to retail customers who “cannot reliably assess the value and risks of derivatives.”
It estimates that the potential benefit to retail consumers from banning these products will be in a range from £75 million to £234.3 million a year.
“Most consumers cannot reliably value derivatives based on unregulated cryptoassets,” wrote FCA executive director of strategy and competition, Christopher Woolard. “Prices are extremely volatile and as we have seen globally, financial crime in cryptoasset markets can lead to sudden and unexpected losses.”
Read more: FCA will take action on insufficient safeguarding
In its response, the WFE has cautioned against an outright ban. It warns that a full ban could envelop “regulated exchanges and central counterparties (CCPs) who operate under stringent regulations to provide pre- and post-trade risk management standards designed to foster safe and efficient markets.”
“Consumer protection must be foremost when seeking to regulate new and innovative products,” says Nandini Sukumar, chief executive officer of WFE.
“While crypto asset products have real potential, the market has suffered from
unregulated providers distributing inappropriate products.
“Market infrastructures that adhere to strict regulatory requirements, embed consumer protection as part of their mandate and understand that integrity is fundamental to well-functioning markets, are best placed to deliver these products and support the developing marketplace.”
The WFE, formerly known as the Federation Internationale des Bourses de Valeurs, or International Federation of Stock Exchanges, is a trade association of publicly regulated stock, futures, and options exchanges.
Founded in 1961 and headquartered in London, its members include the London Stock Exchange, Deutsche Boerse, Euronext, CME Group, and the Shanghai Stock Exchange.
Related: FCA deepens Brexit preparations