UK financial regulator the FCA has issued an interesting statement indicating that while cryptocurrencies are not currently regulated by the FCA, crypto derivatives – including cryptocurrency CFDs – are.
According to the FCA, cryptocurrency derivatives are defined as being “financial instruments” under the Markets in Financial Instruments Directive II (MiFID II), even though the FCA does not consider cryptocurrencies to be currencies or commodities for regulatory purposes under MiFID II. Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable European Union regulations.
And, can therefore only be offered by licensed brokers.
Cryptocurrency derivatives include:
- cryptocurrency futures – a derivative contract in which each party agrees to exchange cryptocurrency at a future date and at a price agreed by both parties
- cryptocurrency contracts for differences (CFDs) – a cash-settled derivative contract in which the parties to the contract seek to secure a profit or avoid a loss by agreeing to exchange the difference in price between the value of the cryptocurrency CFD contract at its outset and at its termination
- cryptocurrency options – a contract which grants the beneficiary the right to acquire or dispose of cryptocurrencies
The full FCA statement on cryptocurrency derivatives can be seen here.