This post was written by Joanna Peasland

The FCA has recently issued a policy statement on “’Prohibiting the sale to retail clients of investment products that reference cryptoassets”.  In its statement, the FCA sets out a ban on derivatives and exchange traded notes that reference certain types of unregulated, transferable cryptoassets from being sold to retail clients. The FCA believes that cryptoassets cannot be valued reliably because they have no intrinsic value and any valuation models are subjective and vary significantly.  Its view is that products that reference cryptoassets are harmful to retail clients, due to the high risk of unexpected losses.  

The ban applies only to unregulated transferrable cryptoassets.  Security tokens (which already qualify as specified investments) and derivatives referencing security tokens are not within the scope of the new regulations.

The proposals will have a direct impact on firms that:

Issue or create products referencing cryptoassets;

Distribute products referencing cryptoassets (this includes brokers, investments platforms and financial advisers);

Market products referencing cryptoassets; and

Operate trading venues and platforms.

 The deadline for such firms to cease all activities in relation to these products is 6 January 2021, following the end of the Brexit transition period. Retail customers with existing holdings can remain invested following the prohibition until they choose to disinvest.