Crypto derivatives trading platform Bybit will end its UK operation by March 31, 2021, the firm announced in its blog.
The decision follows the UK ban on cryptocurrency derivatives and ETNs announced by the UK Financial Conduct Authority (FCA) in 2020. The ban will come into effect by the end of March 2021.
“If you are either a U.K. resident or citizen, please close all your positions and withdraw all account balances by 8AM UTC, March 31, 2021. Thereafter, customers located in or are residents of the U.K. will be restricted from accessing or performing any trading activities on Bybit.
“New sign ups using U.K. mobiles number and/or IP addresses will be restricted immediately. We request your immediate cooperation in this matter. We regret this situation, and will seek dialogue with regulators to explore options. We hope to be able to earn the privilege to serve you again in the future.”
The FCA’s move to ban crypto derivatives and ETNs came amid the accelerating trend of buying such assets. In July 2020, the regulator announced a study conducted online by YouGov which found there were 1.1 million new digital asset holders YoY, and of the 1.9 million that still held their cryptoassets, half have more than £260.
The study found the majority of crypto owners are aware of the lack of regulatory protection afforded and understand the risk of price volatility. However, an estimated 300,000 cryptoasset owners believe they have protection, which leaves them at potential risk of financial harm.
Adverts play a key role in influencing cryptoasset consumers’ decisions, with more than a third of respondents saying an advert made them more likely to purchase it, and of those who purchase cryptoassets, 83% do so through non-UK based exchanges.
The total crypto derivatives ban will take effect on 25 March 2021. The FCA argues “these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the:
inherent nature of the underlying assets, which means they have no reliable basis for valuation
prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
extreme volatility in cryptoasset price movements
inadequate understanding of cryptoassets by retail consumers
lack of legitimate investment need for retail consumers to invest in these products
These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products.”
World Federation of Exchanges Asked FCA Not to Ban Crypto Derivatives
In 2019, the WFE called for the right balance between enabling innovative products to be traded in the UK, and ensuring that they are sold responsibly, by fully regulated providers.
An outright ban, under current proposals, would envelop regulated exchanges and CCPs who operate under stringent regulations to provide pre- and post-trade risk management standards which are designed to foster safe and efficient markets, the WFE stated.
Nandini Sukumar, Chief Executive Officer, WFE said: “Consumer protection must be foremost when seeking to regulate new and innovative products. 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. 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.”
The WFE stated that the structure of established, fully regulated exchange and CCP operators significantly diminishes the risk profile for retail investors participating in these markets. There is caution in applying the same measures to exchange-traded and centrally cleared derivatives as to underlying crypto-asset markets, as this could create unintended consequences, according to the global industry group.
The WFE said that options to mitigate excessive risk exposure for retail consumers should be pursued alongside the potential introduction of ‘standards’ for such products, particularly as the crypto market is evolving and maturing.
Should it be implemented, the ban should be reviewed as the market evolves. in order to ensure consumer choice and access and to avoid international market fragmentation, particularly if international standard setters introduce a new global regulatory approach to the regulation of crypto assets.