FXOpen halts retail derivatives sales

U.K. crypto exchange FXOpen halts retail derivatives sales

In the wake of an U.K. Financial Conduct Authority ruling, FXOpen tells retail customers to close their positions on crypto asset derivatives before Jan. 5

United Kingdom-based foreign exchange trading platform FXOpen announced that it will soon stop selling cryptocurrency derivative products to its retail customers.

According to a Dec. 30 announcement, FXOpen will stop offering crypto asset derivatives to non-institutional investors before Jan. 5 due to new regulations. The exchange’s announcement reads:

“Following the decision by the Financial Conduct Authority (FCA) to prohibit retail clients from trading cryptocurrency CFDs, we regret to inform you as of 5th January 2021, you will be unable to open any new cryptocurrency CFD orders or positions.

“Professional clients,” the company said, “are exempt from this change.

As Modern Consensus reported in early-October, the United Kingdom financial market regulator FCA prohibited the sale of such derivatives to retail customers, suggesting that the average investor cannot understand them. FXOpen’s moves puts it in compliance with those rules.

FXOpen said any positions still held on those assets by retail customers will be forcibly closed at the market price by the exchange.

Cryptocurrency derivatives are not the only asset in the space that are seeing regulators take actions that will inevitably hurt their liquidity. The United States Securities and Exchange Commission (SEC) badly damaged the fourth-largest cryptocurrency, XRP, on Dec. 22, when it announced a lawsuit labeling it an unregistered security sold illegally by international payments firm Ripple.

As Modern Consensus reported at the time, a number of major cryptocurrency exchanges including Coinbase, followed shortly by Crypto.com, and OKcoin, announced that they will suspend trading in XRP by mid-January. 

Industry expert Bruce Fenton, CEO of security tokenization firm Chainstone Labs, called this a natural reaction by firms with U.S. customers, given that they could be accused of selling securities without a license.

In a statement released yesterday, Ripple downplayed the delistings—without calling any firms out by its name—and claimed that the “majority of our customers aren’t in the U.S. and overall XRP volume is largely traded outside of the U.S.”

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Adrian is a newswriter based out of Pisa, Italy. He's passionate about cryptocurrency, digital rights, IT, tech and futurology and likes to think about the future in a positive way.