UK’s Ban on crypto CFD trading is now live
UK’s Ban on crypto CFD trading is now live

UK’s Ban on crypto CFD trading is now live

By Giorgi Mikhelidze - 24 Jan 2021

Chevron down

Although buying and selling of cryptos are legal in the UK, it became illegal as of January 6th, 2021 for brokers to trade cryptos in the U.K or offer trading in crypto derivatives with Bitcoin CFDs inclusive. 

Since very few brokers offer the buying and selling of Bitcoins and other cryptos, yet prefer to allow trade CFDs with clients based on crypto market prices, trading in cryptocurrencies in a UK-regulated CFD/Forex brokerage is now actively a thing of the past. 

However, clients that have an open position in any of the crypto derivatives can continue to trade after the aforementioned date as an exception, since their trade is already in process, but no new positions will be opened.

Due to the recent regulations, FXOpen, a Uk-regulated brokerage discontinued the offer of crypto CFDs as of January 5th, to conform to the Financial Conduct Authority’s prohibition of the sale of cryptocurrency CFDs. They also said that all cryptocurrency CFD positions were supposed to be closed before the 5th of January. And all the remaining positions that were still open and not closed before midnight of that day were forced to close at that day’s market price, although the regulatory body had an exception for already open positions. 

However, the stipulated day for the commencement of the new regulations is passed and we are certain that all open positions before the ban are closed and the ban is currently in full force.

Reasons For FCA sort CFDs Ban

The regulatory body considers that it is essential to restrict the trading of such assets because of its nature and the loss it causes retail consumers. Retail consumers are unable to value the product because of the intrinsic characteristic of the primary assets, which implies that their basis for valuation is unreliable. 

In addition, there have been many cases of financial crime such as cyber theft and market abuse in the secondary market. The products’ price movements are also not helping their case.

Cryptos are highly volatile with very drastic price movements. Although many have made lots of profits from this, a majority of the consumers will attest to the massive losses they have incurred in such trade. The FCA also found the banning of crypto CFDs necessary because there is an absence of legitimate investment needed for users to invest in such products. 

This all implies that users face the possibility of sudden harm and unexpected losses if they decide to invest in crypto assets.

The FCA implies that a lot of consumers have suffered major losses from such investment and considers them as unregulated transferable cryptocurrency assets, which include major tokens like Bitcoin, Ethereum, or Ripple. 

And those that are specified in legislation are considered as a specified investment. Thus, brokers that perform trade of specific types of regulated activity in relation to cryptos are obliged to have authorization from FCA. They used this ban as a tool to address the harm that consumers have been facing. And they evaluate that about £53m of retail consumer funds will be saved by this ban. 

According to the FCA interim Executive Director of Strategy & Competition, Sheldon Mills, this ban shows how serious they are about protecting customers from any high-risk investment. However, there are brokers like Axiory, who do not provide CFD trades on cryptos for their customers. Especially because it is deemed to be a little too risky than usual for customers, given the high level of volatility involved.

How The FCA Ban Affects Brokers

It is important for all brokers to carefully read through the policy statement PS20/10 of the regulatory body to understand what you need to do. As a result of this ban, companies that distribute a product referenced by crypto assets, with brokers, financial advisers, and investment platforms inclusive have been adversely affected. 

Also, companies that create or issue products that reference crypto assets are not left out of the impacts of the ban. In addition to the list, trading venue operators and platforms will be affected, as well as firms that market products that reference crypto assets. 

This comes at a time when Bitcoin is experiencing a rise in value and according to this currency strength meter guide, traders are using currency strength meter tools to determine the value of any given currency, and in the case of BTC, it has been at a record-breaking high since the start of 2021 and experts are very optimistic about its future turnouts.

For a company that carries out selling activities or market and distribute in, or from, the United Kingdom of crypto CFDs to retail clients must discontinue. The FCA is currently on the lookout for firms that go against these new regulations. This however has not stopped companies licensed by authorities such as the CySEC to continue their operations.

What To Do

FCA is only one of the many regulatory authorities that control operations on the financial market and clients that have been affected by this ban can open an account with a broker that is regulated by the International Financial Services Commission (IFSC) in Belize. Because there is no provision in the law that prohibits UK residents from registering for an account with offshore brokers who are not FCA regulated. However, retail brokers operating in the UK must stop trading crypto assets. 

Also, for customers whose brokers are FCA regulated yet are regulated by other regulatory bodies and they are a resident outside the United Kingdom, it is possible for them to request that the administration of your account be moved to another regulatory center beside the FCA, although many brokers will be reluctant to do this.

Consumers can also open an account with a Bitcoin exchange that offers live unleveraged buying and selling of cryptos because they are not covered by the ban.

All things considered, a majority of the brokers that have been affected by the FCA ban will make sure that they comply with the new rules in order to avoid losing their license altogether. This has greatly affected crypto investors especially at a time when Bitcoin experienced its all-time high after a very long time. While brokers and traders are still trying to figure out what to do for crypto trading during this period, the ban is live!


Giorgi Mikhelidze

Giorgi is a Georgia software developer with two years of experience trading on the financial markets. He is now working to spread the knowledge about the Blockchain in his country and share all of his findings and research to as many crypto enthusiasts as possible.

We use cookies to make sure you can have the best experience on our site. If you continue to use this site we will assume that you are happy with it.