The UK FCA Just Warned Bitcoin Traders Away From CFDs

The UK FCA Just Warned Bitcoin Traders Away From CFDs

From a regulatory perspective, the question as to how various policymakers in different jurisdictions will approach Bitcoin and the wider Cryptocurrency space is one that very much remains in place. We have had some degree of advance on that front over the last few months but, right now, the vast majority of insight derives from the odd comment here and there made by central bankers or certain policymakers at conferences and the like.

Of those regions that have offered insight, the UK has probably been one of the most forthcoming (that is, of course, excepting China which has made its feelings extremely clear) and, this week, we have yet another update regarding regulatory perceptions of Bitcoin and blockchain in the UK.

This time the update has come from the FCA, the Financial Conduct Authority, and comes in the form of a warning to retail investors that are considering investing in contracts for difference, or CFD's, associated with Bitcoin.

For those not familiar with the concept of CFD's, they are a tradable instrument that mirror the movements of a particular asset, in this instance Bitcoin, that underlies the instrument itself. They are basically seek to track the price of the underlying asset to as accurate a degree as possible.

Here is what the FCA has to say on the matter:

"Cryptocurrency CFDs are an extremely high-risk, speculative investment… and are vulnerable to sharp changes in price due to unexpected events or changes in market sentiment… the value of some Cryptocurrencies recently fell by more than 30% in a single day."

The agency also highlighted the fact that, with this being a relatively unregulated industry, the fees charged by certain companies offering Bitcoin CFD's could differ dramatically and – in turn – could have a severe impact on the profitability of taking a position on Bitcoin through this channel.