The World Federation of Exchanges (WFE), a global body representing over 70 financial market exchanges globally, has told the U.K Financial Conduct Authority (FCA) that they do not support a proposed move by the regulator to ban the sale of crypto derivatives to retail investors.
The FCA, as we reported in July, proposed a ban on the sale of crypto-based derivatives to U.K residents, citing a need to protect consumers from a lot of risks and the prevalence of market abuse.
However, such a move would be extreme according to the announcement published by the WFE on Monday, who urged the regulator to find instead the right balance between enabling innovative products to be traded within their jurisdiction and ensuring that they are sold only by fully regulated providers.
Nandini Sukumar, CEO of WFE who shared her thoughts in the announcement reportedly said:
“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.”
Among the WFE’s recommendation is that the FCA strives to reduce the risk for consumers by paying attention to the underlying market structure of crypto derivatives, including exchange operators that offer such products.
The WFE also alerted the FCA to the fact that caution is needed in transferring measures that apply to the traditional derivatives market to the emerging crypto asset class.
Such vague application of rules could “create unintended consequences,” the WFE warned before recommending that options be provided for ‘the potential introduction of ‘standards’ for such products, particularly as the crypto market is evolving and maturing.’
Lastly, the WFE urged that even if the FCA goes ahead to enforce its proposed ban, then they should review it in the future to ensure consumer choice and access while at the same time avoiding international market fragmentation.
The FCA is expected to announce its final rule changes sometime in Q1 2020, with the consultation period for their proposed ban ending on October 3.