Response to the FCA Consultation on derivatives referencing cryptoassets
A ban on derivatives referencing cryptoassets is inappropriate to protect retail investor interests. Further regulation can reduce risks – measures should be balanced in order to foster innovation
Börse Stuttgart does not agree with the FCA proposal to prohibit the sale, marketing, and distribution of CFDs, futures, options, and ETNs referencing cryptoassets to retail investors. We do not see sufficient evidence for the risks described by the FCA: Various academic studies show that cryptoassets do have a fundamental value. The definition simply differs from traditional assets due to their unique properties. We believe that further regulation and guidelines can reduce risks associated with financial crime, market abuse and operational issues. Overall, regulation should be balanced in order to foster innovation. High volatility in prices of cryptoassets are no reason to ban derivatives on cryptoassets. We document that some FTSE 250 stocks show similar day-to-day price changes as bitcoin. Investors benefit from cryptoassets since they allow for portfolio diversification and pose a valued investment opportunity. The analyses in the FCA consultation paper exhibit evident shortcomings – a ban cannot be justified given the applied methodology.