Crypto Brokerage firm FXOpen has been forced to cease offering Crypto derivatives (CFDs) in the UK. The decision comes after the UK’s Financial conduct Authority imposed a ban on crypto derivatives.
FXOpen said that from January 5, 2021, it will stop offering crypto CFDs to comply with the FCA’s new directives. Clients will subsequently be unable to open any new cryptocurrency CFD positions or orders once the deadline is reached.
Existing clients will also be forced to close all their positions on crypto CFDs, before 5th January. The firm has warned its clients that it will force-close all remaining open positions after the deadline at the market price.
However FXOpen exclusively stated that the ban will only affect clients with accounts under its UK-subsidiary FXOpen UK. Customers with other accounts under any other FXOpen Group companies will continue accessing full CFDC trading services.
FCA: Crypto CFDs are Ill-suited for retail clients
The FCA announced that it will officially ban retail sale of CFDs and exchange-traded notes (ETNs) from January 6. FXOpen said that while the FCA is imposing a ban on CFDs for retail clients, demand has been skyrocketing. Institutional investors and professional traders in particular have been leading the demand for CFDs. These two categories of customers are also exempt from the ban which specifically seeks to protect retail investors.
According to the FCA, crypto derivatives are ill-suited for retail clients, usually causing more harm than is presumed. Their volatility and existence of high market manipulation makes their value unreliable for retail investors.
“This ban reflects how seriously we view the potential harm to retail consumers in these products. Consumer protection is paramount here.” Said Sheldon Mills, the acting director of Strategy and completion at the FCA.
More affected brokers in the UK are also expected to announce their stances before the deadline. The FCA has further said that the ban will help investors save nearly £53 in losses suffered from CFDs.
“Significantly price volatility combined with the inherent difficulties of valuing crypto assets reliably, places retail consumers at high risk.”
In similar FXOpen News, Crypto derivatives exchange BitMEX is also facing a lawsuit in the US for violating regulatory guidelines. The exchange is accused of several violations, including accepting US clients illegally on its platform.
FXOpen is an Australian broker with operational licensing in the UK from the FCA. The broker was founded in 2003 Egypt as an educational hub for technical analysis. Its other services include online forex trading, precious metals, and cryptocurrencies.