The Financial Conduct Authority of the United Kingdom has proposed the banning of all cryptocurrency products. The regulatory body claims that the products are more likely to cause significant losses to retailers that lack a proper understanding of the goods. In their proposal, FCA pointed out that cryptocurrency products such as Exchange-traded notes used as crypto assets were not suitable for retailers and small-scale investors.
In their argument, FCA has pointed out the following reasons as to why they want the cryptocurrency products to be banned:
The volatility of the products. FCA has warned that the high instability found in Cryptocurrencies may lead to sudden and unexpected losses for investors that opt to use the crypto assets. Referring to Bitcoin’s current price swing, FCA has made it clear that cryptocurrency prices lack stability; falling and rising irregularly, which is not good for business.
Bitcoin’s price experienced a slight correction dropping from highs of $13,500 to lows of $10,000. Some market analysts say it may hit as high as $30,000 while some suggest that it may fall below $5,000 in the coming future. Such is the instability that the FCA warns could hurt the economy.
Secondly, the FCA has pointed out that most consumers lack knowledge about some of the complex financial project based on cryptocurrencies such as the Exchange-traded notes. The lack of understanding makes the products unsuitable for use because any medium that’s to be used in trade has to be easily understood by all consumers, according to the body’s financial policies.
Another reason cited by the Financial Conduct Authority is the difficulty in valuing the cryptocurrency products. Any financial product has to have a known and reasonable value for it to be effective. Additionally, the body also stated that these cryptocurrency products would increase financial crime.
Earlier last week, UK’s top watchdog warned that Facebook’s project would have to go through stringent scrutiny before it is allowed to operate. This therefore leaves us wondering whether if the proposed ban is a measure being put in place to see to it that Facebook does not get to launch Libra or not?
Nonetheless, we will have to wait and see whether or not the ban shall be implemented.