British Disagreements Over Crypto Investment Products
2023.01.24 05:19
British Disagreements Over Crypto Investment Products
By Tiffany Smith
Budrigannews.com – There was disagreement among policymakers in the United Kingdom regarding whether cryptocurrency-related derivatives and exchange-traded notes (ETNs) should be prohibited from retail investors. The Regulatory Policy Committee believes that the measure, which was approved in 2021, does not make sense given the current situation.
The Financial Conduct Authority (FCA), the primary British regulator, enacted the prohibition in January 2021. Since then, the businesses were unable to provide retail customers with cryptocurrency derivatives products like futures, options, and exchange-traded notes, or ETNs.
At the time, the FCA’s proposed “disproportionate” prohibition ignored 97% of respondents to its own consultation, who argued that retail investors are capable of evaluating the risks and value of crypto derivatives.
The advisory public body sponsored by the government’s Department for Business, Energy, and Industrial Strategy, the Regulatory Policy Committee (RPC), presented its arguments against the FCA’s prohibition on January 23, 2023.
The RPC estimated the measure’s annual loss at approximately $333 million (268.5 million British pounds) using the cost-benefit analysis. The FCA, according to the Committee, did not provide a precise explanation of what would take place in the absence of the prohibition.
Additionally, the methodology and calculations used to estimate the costs and benefits at the time were not explained. As a result, the RPC assigns the prohibition the rating of “red,” indicating that the review indicates that it is unsuitable for its intended use.
The negative review conducted by RPC does not always result in the immediate repeal of legislation. However, the Committee’s connections to the Department for Business, Energy, and Industrial Strategy may indicate a divergent understanding of the FCA’s and the government’s reasonable regulation.
The British financial authorities put in a lot of effort this past year to help the digital industry grow. For instance, the list of investment transactions that are eligible for the Investment Manager Exemption included the “designated crypto assets.”
