Our weekly list of announcements about how capital markets and regulators are engaging with digital assets.
FCA proposes ban on sale of crypto-derivatives to retail consumers
The Financial Conduct Authority (FCA) is proposing rules to address harm to retail consumers from the sale of derivatives and exchange-traded notes (ETNs) referencing certain types of crypto assets. The FCA considers these products are ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets (crypto-derivatives).
This is due to: inherent nature of the underlying assets, which have no reliable basis for valuation; the prevalence of market abuse and financial crime in the secondary market for crypto assets (eg cyber theft); extreme volatility in crypto asset prices movements, and inadequate understanding by retail consumers of crypto assets and the lack of a clear investment need for investment products referencing them.
The FCA is therefore consulting on banning the sale, marketing and distribution to all retail consumers of all derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable crypto assets by firms acting in, or from, the UK. The regulator estimates the potential benefit to retail consumers from banning these products to be in a range from £75 million to £234.3 million a year.
Christopher Woolard, executive director of Strategy and Competition at the FCA, said in a statement: “These are complex contracts built on top of complex assets. Most consumers cannot reliably value derivatives based on unregulated crypto assets. Prices are extremely volatile and as we have seen globally, financial crime in crypto asset markets can lead to sudden and unexpected losses.”
CFTC gives ErisX license for digital asset market clearing
ErisX announced that the Commodity Futures Trading Commission (CFTC) granted Eris Clearing a derivatives clearing organization (DCO) license, which supplements the Designated Contract Market (DCM) license already held by Eris Exchange since 2011.
ErisX’s digital asset market is divided between exchange and clearing models, a structure that targets institutional investor participation, explained CEO Thomas Chippas in a statement. As a registered DCO, the ErisX clearinghouse will offer the clearing of digital asset futures contracts traded on ErisX’s regulated derivatives market, which will launch later this year.
Crypto exchange Binance transfers $1.2 billion
The Binance Chain blockchain processed a transaction in 1.1 seconds that cost $0.015 in fees and transferred value of $1.2 billion between unknown parties.
This transaction: cost $0.015 USD in fees, took 1.1 seconds, and $1.2 BILLION in value transferred.
The future is here. https://t.co/vie0B79zKC
— CZ Binance (@cz_binance) June 26, 2019
Euronext invests in compliant tokenization platform Tokeny
Euronext announced it’s subscribed the entire €5 million capital increase of Tokeny Solutions, resulting in a 23.5% stake and governance representation. Launched in 2017, Tokeny Solutions helps all private markets securities issuers — from mid-cap companies and asset management companies to advisors like investment banks — issue, manage and transfer tokenized securities on public blockchain.
Tokeny Solutions’ unique T-REX protocol1 integrates compliance obligations into the digital asset smart contract, to create tokens compliant by design. This investment complements Euronext’s position in the nascent digital asset industry, combining Tokeny Solutions’ token management expertise with post-trade solutions from LiquidShare, a post-trade blockchain fintech venture with shareholders such as BNP Paribas, CACEIS, Euroclear, Euronext, and SocGen.