In a move that sent ripples through the digital asset industry, the United Kingdom’s Financial Conduct Authority announced on July 3, 2019, a proposal to ban the sale of crypto-derivatives to retail consumers entirely. The sweeping consultation paper targeted contracts for difference, options, futures, and exchange-traded notes referencing unregulated cryptoassets — effectively proposing to wall off a significant segment of the crypto investment market from everyday British investors.
TL;DR
- The FCA proposed a blanket ban on selling crypto-derivatives to retail consumers in the UK
- Products covered include CFDs, options, futures, and ETNs referencing unregulated cryptoassets
- The regulator estimated the ban could protect consumers from £75 million to £234.3 million in annual losses
- Key concerns: unreliable valuations, market abuse, extreme volatility, and inadequate consumer understanding
- The proposal followed the UK Cryptoasset Taskforce’s October 2018 final report
Why the FCA Acted
The regulator’s case rested on four pillars of concern. First, the inherent nature of cryptoassets meant there was no reliable basis for valuation — unlike traditional securities with earnings reports and audited financials, Bitcoin and other cryptocurrencies lacked fundamental anchors that retail investors could use to assess fair value.
Second, the FCA pointed to the prevalence of market abuse and financial crime in secondary crypto markets, including cyber theft and manipulation schemes that had become all too common in the relatively unregulated space.
Third, extreme volatility in cryptoasset price movements made derivatives referencing them particularly dangerous for retail investors who might not fully appreciate the risks of leveraged exposure. With Bitcoin trading near $11,961 and showing rapid swings on CoinMarketCap data for July 3, 2019, the volatility concern was not abstract.
Fourth, the FCA cited inadequate understanding by retail consumers of cryptoassets and a lack of clear investment need for products referencing them.
The Scope of the Proposed Ban
The consultation proposed prohibiting the sale, marketing, and distribution to all retail consumers of all derivatives and ETNs that referenced unregulated transferable cryptoassets. Firms acting in or from the UK would be bound by the restriction.
Unregulated transferable cryptoassets were defined broadly to include tokens that were not specified investments or e-money but could be widely transferred — encompassing major cryptocurrencies like Bitcoin, Ether, and Ripple’s XRP.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, was blunt in his assessment: “As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets.”
Building on Previous Action
The crypto-derivatives proposal did not emerge in a vacuum. Just two days earlier, on July 1, 2019, the FCA had published Policy Statement PS19/18, which finalized rules restricting the sale of CFDs and CFD-like options to retail clients. Those rules included setting leverage limits of 2:1 on CFDs referencing cryptocurrencies — a significant restriction that already acknowledged the heightened risk profile of crypto-based products.
The July 3 proposal went much further, however, targeting not just leverage but the entire retail market for these instruments. The FCA estimated that retail consumers could benefit from the ban to the tune of £75 million to £234.3 million annually — a figure that underscored just how much money was being lost in the sector.
The move also followed the UK Cryptoasset Taskforce’s Final Report from October 2018, which had committed the regulator to exploring a potential ban. In January 2019, the FCA had consulted on Guidance on Cryptoassets to clarify which types fell within its regulatory perimeter, with that consultation closing on April 5, 2019.
Industry Reaction and Context
The proposal landed at a moment when the broader crypto market was experiencing renewed optimism. Bitcoin had surged past $11,900, Ethereum was trading above $300, and total market capitalization had recovered significantly from the depths of the 2018 bear market. Major altcoins like Litecoin at $122.56, Bitcoin Cash at $422.61, and EOS at $6.11 were all posting gains, attracting fresh retail interest.
It was precisely this combination of rising prices and growing retail participation that appeared to concern the FCA. The regulator had previously issued consumer warnings about crypto investments, but the derivatives proposal represented its most aggressive intervention to date.
The FCA expected to publish its final Guidance on Cryptoassets later in the summer of 2019, with the crypto-derivatives consultation running in parallel. For the industry, the message was clear: the UK’s top financial regulator saw crypto-derivatives as fundamentally incompatible with retail consumer protection.
Why This Matters
The FCA’s July 2019 proposal was a watershed moment in crypto regulation. While the ban would not be finalized until October 2020, the initial consultation signaled that major financial regulators were willing to take sweeping action against crypto investment products they deemed harmful to retail consumers. The estimated £75-234 million in annual consumer losses highlighted the real financial damage being done. For the crypto industry, the proposal underscored the tension between market access and consumer protection — a debate that continues to shape regulatory frameworks worldwide. The UK’s approach would eventually influence similar discussions in the European Union’s MiCA regulation and beyond.
Disclaimer: This article was written for historical reference as part of a backfill series. Prices and market data reflect conditions on July 3, 2019. This content should not be interpreted as current financial advice.