When it comes to retail investors, policymakers in the United Kingdom disagree on whether it is appropriate to forbid the sale, marketing, and distribution of derivatives and exchange-traded notes (ETNs) linked to cryptocurrencies. The Regulatory Policy Committee thinks the 2021-adopted measure needs to be revised in light of the current situation.
The ban was implemented in January 2021 by the Financial Conduct Authority (FCA), the top British regulator. Since that time, businesses are no longer permitted to provide retail clients with bitcoin derivative products like futures, options, and exchange-traded notes (ETNs).
Despite 97% of respondents to the FCA’s consultation rejecting the “disproportionate” restriction and many stating that ordinary investors are capable of evaluating the risks and value of crypto derivatives, the blanket ban was nonetheless implemented.
The Regulatory Policy Committee (RPC), an advising public body supported by the government’s Department for Business, Energy, and Industrial Strategy, presented its arguments against FCA’s restriction on January 23.
The RPC estimated annual losses from the policy at around 268.5 million British pounds ($333 million) using the cost-benefit analysis. According to the RPC, the FCA didn’t clarify what would occur if the prohibition weren’t in place. Additionally, it left out a description of the calculations and methods used to assess the costs and benefits at the time. In light of this, the RPC assigns the ban a “red” rating, indicating that it is unfit for purpose.
Legislation may only sometimes be directly reversed as a result of the RPC’s unfavorable evaluation. However, considering the committee’s connections to the Department for Business, Energy, and Industrial Strategy, it might indicate that the FCA and the government have differing views on what constitutes a legitimate regulation.