The global industry group for exchanges and CCPs has asked the Financial Conduct Authority, the UK’s regulatory authority, not to ban the sale of crypto derivatives to retail consumers.
While agreeing and supporting the regulator’s desire to better protect vulnerable consumers, the WFE wishes to help find 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.