How Far should the Government Go to Protect its People?

[Darker45]

FCA bans the sale of crypto-derivatives to retail consumers

The reasons cited seem to be very sweet and replete with tender loving care. In general, it says, "Consumer protection is paramount here." In details the following are mentioned:^[1]

• inherent nature of the underlying assets, which means they have no reliable basis for valuation
• prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
• extreme volatility in cryptoasset price movements
• inadequate understanding of cryptoassets by retail consumers
• lack of legitimate investment need for retail consumers to invest in these products 

Now, whatever happened to freedom, caveat emptor, DYOR, risk-taking, and so on and so forth?

I admit it is hard to understand how Bitcoin futures trading works, or CFDs, or ETNs, or whatever, but would you not allow your kid to take a dip in the ocean or a pool because he/she doesn't know how to swim? This ban is full of presumptions. It is over-protection. They must have assumed the people are not to be trusted and are incapable of understanding and responsibly getting into risky forms of investments. But you wouldn't just deprive a child of a bicycle so that he/she won't figure into an accident that might cause him/her scratches, would you?

[1] https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers

[mk4]

It's really weird. Things like this aren't going to be allowed, and things like people needing to be an accredited investor to be able to legally invest in unregistered securities, but gambling is available for everyone with only having an age requirement. I know both things aren't 100% the same, but it just doesn't add up.

[Darker45]

It's really weird. Things like this aren't going to be allowed, and things like people needing to be an accredited investor to be able to legally invest in unregistered securities, but gambling is available for everyone with only having an age requirement. I know both things aren't 100% the same, but it just doesn't add up.

It is weird and funny, too. The ban is following a really crazy sense of logic. And they even went as far as pre-judging that the people do not understand cryptocurrency assets enough. They even took over their sense of individuality when they claimed that the people do not need these types of investment.

Following their logic, we could indeed say they should've banned gambling so that the people won't experience bitter gambling losses. Or why don't they ban schools so that students won't have to fail in their exams?

[20kevin20]

It honestly looks like this is only the genesis of a Nanny State. Overprotective governments is something we shouldn't allow to develop.

I can literally go over the internet, look almost anything up and meet so many hundreds, hell - maybe even thousands of scammy ads and products nobody cares about taking off the web. The crypto underground markets are nothing compared to non-crypto ones.. Why is it that they always make it look like cryptocurrencies create all sorts of problems possible humanity's never confronted before?

[Wexnident]

So instead of educating their people of what crypto currency is to avoid problems, they instead just straight up ban it for their so called "Consumer Protection"?? Isn't ignorance the greatest damage one can get, and only with knowledge would one be truly safe? All of their reasons simply sound like excuses to me and not legitimate reasons at all. Problems with reasonable solutions shouldn't really be seen as problems at all.

The only thing left for them to ban is the ability of people to be curious, to be creative, and to be informed tbh. The only thing missing in their announcement would be something along the lines of "I decide what you get to do, not you" kind of thing, an act of controlling under the guise of protection.

[Lorence.xD]

So instead of educating their people of what crypto currency is to avoid problems, they instead just straight up ban it for their so called "Consumer Protection"?? Isn't ignorance the greatest damage one can get, and only with knowledge would one be truly safe? All of their reasons simply sound like excuses to me and not legitimate reasons at all. Problems with reasonable solutions shouldn't really be seen as problems at all.

The only thing left for them to ban is the ability of people to be curious, to be creative, and to be informed tbh. The only thing missing in their announcement would be something along the lines of "I decide what you get to do, not you" kind of thing, an act of controlling under the guise of protection.

I think the points in OP's post make sense. They are not that harsh in my opinion, the problem here is that they did an iron fist ruling in regards to the issue, a better solution would have been regulation and monitoring. In bureacratic perspective though, regulation will not be a cure all, someone will slip through the cracks no matter how strict the regulation is. Monitoring will cost a lot of manpower which means that they will need a bigger funding. I agree regarding educating the masses because this is the most practical solution forthis, some will be cynical with the solution because there will be ignorants that will dismiss education, let me tell you this, if the masses money is involved, I am sure that they are going to listen.

[mk4]

And they even went as far as pre-judging that the people do not understand cryptocurrency assets enough.

To be fair, they might actually be right if that was their assumption.  

With that said, even if we assume that they're actually trying to "protect" people, they're totally over killing it. I also have the belief that learning the hard way(by losing money on the markets, regardless of size) is also one of the best ways of learning in general. It's like prohibiting your son from going outside to protect him from bullies and kidnappers and such, but that will cause him to be a complete idiot with near-zero social skills in the long-term.

[Yogee]

They probably know what's happening in the UK better than us.

We have evidence of this happening on a significant scale

FCA must have received a lot of complaints and they're acting as a concerned parent here who doesn't want his children, the uninformed citizens, to spend their money on things they don't fully understand.

[stompix]

I admit it is hard to understand how Bitcoin futures trading works, or CFDs, or ETNs, or whatever, but would you not allow your kid to take a dip in the ocean or a pool because he/she doesn't know how to swim?

So, you yourself don't know how to swim, but you still think throwing your kid in a 2-meter deep pool is the best way to make him learn swimming?
When the government bans something people are outraged that the government is not letting them decide for themselves, once they get scammed or made bad moves they again lash at the authorities for not protecting the consumers, no matter how you try it, you won't be making everyone happy, that's for certain.

Or why don't they ban schools so that students won't have to fail in their exams?
Now, whatever happened to freedom, caveat emptor, DYOR, risk-taking, and so on and so forth?

Or if we make those kind of exagerations, how about also close hospitals so nobody gets labeled a sick or ill, and if you want to perform surgery do your own research and take risks?
Rather than hearing that I would love to see you criticizing the list they have shown and tell me why do you think a thing that is not making that requirement should be allowed.

I can literally go over the internet, look almost anything up and meet so many hundreds, hell - maybe even thousands of scammy ads and products nobody cares about taking off the web. T

Exactly what I was saying, the moment somebody will start making a requirement for those ads and you won't be allowed to purchase ads space without proper documents I bet you will be the first screaming censorship.
You want rules but only the rules that are favorable to you  

[20kevin20]

Exactly what I was saying, the moment somebody will start making a requirement for those ads and you won't be allowed to purchase ads space without proper documents I bet you will be the first screaming censorship.
You want rules but only the rules that are favorable to you  

I agree with loss prevention, but I do not agree with solid restrictions and bans of certain activities newbies jump into and fall for. One who may want to play with some crypto-derivatives may be banned, but they will likely jump at one point into something similar and still lose their money. If they don't do their own research before jumping into the crypto boat, why would they DTOR for another kind of investment?

There are some activities out there that result in way larger losses annually than the sales of crypto-derivatives, and one of them has been mentioned above by @mk4: gambling. I am not an addicted gambler anymore, so the following statement is not something that results in me "willing only the rules that are favorable to me": the UK Ministers were/are considering imposing gambling limits which is something I do not agree with either. If I can purchase a real estate property worth $500k that could very easily have its value go down through a crisis by at least 50% which results in an at least $250k loss for me, why should I not be allowed to assess my own risks and use my money the way I want? It's my money, my life, my risk.

After all, I am here right now because I want freedom - not restrictions or bans. Should a forest be banned from the public because there are dangerous animals inside that may hurt a human?

If we are following the "it's fine for the government to be overprotective" idea, then we may also have food, water, shopping, driving, working limits as well in order to reduce various losses, including environmental damage. Perhaps, if we all flushed our toilets less often it would be better for the environment - or if we were all only allowed to drive for 12h a day. But how would a world like that look like?

[stompix]

There are some activities out there that result in way larger losses annually than the sales of crypto-derivatives, and one of them has been mentioned above by @mk4: gambling.

So basically, whataboutism, what about gambling..
Rather than thinking what are the differences between those, rather than thinking of all the other things that are regulated you went straight for the black sheep and used it as an argument...
This is getting boring, every time somebody points out something bad about the crypto environment the zealots scream what about!!!!!!

It's my money, my life, my risk.

Then if you want total freedom everyone should be free to run any scheme and not be accused of scamming the users because they should be allowed to make their own decisions and take their own risks, the point I was trying to make is that if you want freedom you have to acknowledge that it must come for both sides in this case. If you're willing to invest in something that I quote "inherent nature of the underlying assets, which means they have no reliable basis for valuation" which would turn out to be zero value vaporware are you willing to sign a forfeit at buying those that you will take the blame for every loss and not contact any government authority and make no demand for reparation in this case? Should I be free to operate an investment fund backed by crypto with no authorization from no authority in the world and with no consequences is I lose everything?

After all, I am here right now because I want freedom - not restrictions or bans. Should a forest be banned from the public because there are dangerous animals inside that may hurt a human?

As I said, childish behavior, I assume you have your house packed with asbestos and you spray your plants daily with a dose of DDT. See, anyone can make analogies that make no sense whatsoever.

[Darker45]

I admit it is hard to understand how Bitcoin futures trading works, or CFDs, or ETNs, or whatever, but would you not allow your kid to take a dip in the ocean or a pool because he/she doesn't know how to swim?

So, you yourself don't know how to swim, but you still think throwing your kid in a 2-meter deep pool is the best way to make him learn swimming?
When the government bans something people are outraged that the government is not letting them decide for themselves, once they get scammed or made bad moves they again lash at the authorities for not protecting the consumers, no matter how you try it, you won't be making everyone happy, that's for certain.

No, I won't just throw him into the pool, but I won't deprive him of it either. Surely, there must be a way for the kid to learn how to swim or to enjoy the pool even without knowing how to swim.

I believe our choices are not severely limited to extremes here. Is this just between making crypto derivatives available to retail consumers or not at all?   

Or why don't they ban schools so that students won't have to fail in their exams?
Now, whatever happened to freedom, caveat emptor, DYOR, risk-taking, and so on and so forth?

Or if we make those kind of exagerations, how about also close hospitals so nobody gets labeled a sick or ill, and if you want to perform surgery do your own research and take risks?
Rather than hearing that I would love to see you criticizing the list they have shown and tell me why do you think a thing that is not making that requirement should be allowed.

My point is that Bitcoin has no reliable basis for valuation, susceptible to market abuse, volatile, not thoroughly understood or even misunderstood by the majority, and is not a need for people to invest on. The question is, should we, therefore, ban Bitcoin?

Again, surely, there must be a way not to throw the baby out with the bathwater.

[Harlot]

The funny thing about their reasoning is they allow independent direct trading of cryptocurrencies from several licensed crypto exchanges yet they ban people from being part of crypto-derivatives that is usually manage by a portfolio manager, this alone could make you tell that their reasoning about consumer protection is wrong since trading independently is more risk as compared to people who are managing the assets for you. With this kind of reasoning I think their citizens have a chance to have some kind of appeal to remove this unfair ban for an investment opportunity.

[stompix]

My point is that Bitcoin has no reliable basis for valuation, susceptible to market abuse, volatile, not thoroughly understood or even misunderstood by the majority, and is not a need for people to invest on. The question is, should we, therefore, ban Bitcoin?

And yet, they have not banned bitcoin, right? Nor have they banned users from buying it! So? The point is, as I am starting to lose it with so many comparisons.

I believe our choices are not severely limited to extremes here. Is this just between making crypto derivatives available to retail consumers or not at all?    

Oh, they are limited, unfortunately.
It's simple, you allow them or you don't allow them.
Once you deny them it's pretty easy, you wash your hands for it and it's gone, once you allow them it's like taking responsibilities for them and for the people that might put money in it, and myself as a hater of paperwork I wouldn't want to take the job of drafting regulations for this nor keeping watch on them. Besides, labeling myself as some species of bitcoin maximalist, I can't see anything good from those, and rather than that, I'm more inclined to think they are somewhat toxic for the environment.
And as you can see, BTC (the real one not some shady byproduct) doesn't give a damn about it either.

[dothebeats]

The government--for the most part--just allows certain industries to flourish and make it legal for as long as it helps the economy big time, even if it has the same adverse effects to the ones that they have banned. The government doesn't mean any harm, I'm pretty sure of it, though they are just trying to make the environment safe for everyone so that when the mass adoption comes to play, everyone will have a better shot into making something out of it. Even in 10 years, bitcoin and cryptocurrencies are pretty young assets and investments compared to traditional assets out there. The scene is not optimal for newbies' involvement and the regulations aren't that ironed out yet that's why the government is trying to educate its people as much as it can.

Even today, with regulations and laws implemented to protect the consumer, people are still getting duped and scammed by cryptocurrency-related services and platforms. This is mostly to poor research, of course, but there are still some reputable and trusted exchanges that have gone rogue and never reimbursed their users, or if they did it took them a long ass time to do so. I guess once everything is fixed and settled on the side of laws and regulations, the government would be more open to accept crypto investments. There's money to be made on such platforms, why would the government outright ban those if they know that they can fix a thing or two and profit off of it?

[Fundamentals Of]

The funny thing about their reasoning is they allow independent direct trading of cryptocurrencies from several licensed crypto exchanges yet they ban people from being part of crypto-derivatives that is usually manage by a portfolio manager, this alone could make you tell that their reasoning about consumer protection is wrong since trading independently is more risk as compared to people who are managing the assets for you. With this kind of reasoning I think their citizens have a chance to have some kind of appeal to remove this unfair ban for an investment opportunity.

Their reasoning may have a point. They may truly be after the protection of the consumers but they are apparently overdoing it. Their decision to ban is like saying that crypto-derivatives are a bad thing altogether, which is not the case as they are investment opportunities which people could benefit from.

But just like other investment opportunities, they have some risks involved. That is true to crypto-derivatives as well as to stocks, precious stones such as gold, bonds, forex, etc. There is no investment without any risks involved. It is impossible to completely eliminate risks.

[ShowOff]

And yet, they have not banned bitcoin, right? Nor have they banned users from buying it! So? The point is, as I am starting to lose it with so many comparisons.

Yes, because this banning rule will take effect from January 6, 2021 based on sources.

Their reasoning may have a point. They may truly be after the protection of the consumers but they are apparently overdoing it. Their decision to ban is like saying that crypto-derivatives are a bad thing altogether, which is not the case as they are investment opportunities which people could benefit from.

This is a reasonable form of protection from the government to anticipate potential fraud that has been detrimental to retail consumer in most crypto derivative asset. I know that not all decision taken by the government are acceptable and beneficial to investor and trader, this is sometimes against the will of investor and trader. But I am not sure they will also ban all trading of non-fraudulent crypto assets especially bitcoin (although sometimes it happens on several trading platform). It is important to be aware of the potential downsides that crypto investing can bring and this is what the government hopes for all crypto investors especially in UK jurisdictions.

But just like other investment opportunities, they have some risks involved. That is true to crypto-derivatives as well as to stocks, precious stones such as gold, bonds, forex, etc. There is no investment without any risks involved. It is impossible to completely eliminate risks.

I'm sure the government is aware of it too, and that's why we must choose wisely the good crypto asset to invest in. Sometimes fraud can be avoided and sometimes it is not and we must remain vigilant and accept all the risk.

[hatshepsut93]

It's really weird. Things like this aren't going to be allowed, and things like people needing to be an accredited investor to be able to legally invest in unregistered securities, but gambling is available for everyone with only having an age requirement. I know both things aren't 100% the same, but it just doesn't add up.

Just like investing regulation, it varies from country to country, and in some countries gambling is officially banned, while others restrict it to some special zones. Also, with gambling people at least understand that it is a game of chance, but with investments they often think that they will make profit because of their skill, but this is not true if a market is heavily manipulated.

IMO if a market is full of scams, like it was with ICO, it's better for it to be banned, because it is not productive, it's going to crash anyway, but at least less people will suffer in the end.

[Ucy]

I think the reasons stated there should be understood and solved so that the government does not have enough reason to intervene. If a crypto company is safe and good, banning would be considered lawlessness/dictatorship.
This is why it's better to be decentralized and censorship resistant so that if you are doing what is moral/good/safe, nobody can go against you on their own.

[avikz]

FCA bans the sale of crypto-derivatives to retail consumers

The reasons cited seem to be very sweet and replete with tender loving care. In general, it says, "Consumer protection is paramount here." In details the following are mentioned:^[1]

• inherent nature of the underlying assets, which means they have no reliable basis for valuation
• prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
• extreme volatility in cryptoasset price movements
• inadequate understanding of cryptoassets by retail consumers
• lack of legitimate investment need for retail consumers to invest in these products 

Now, whatever happened to freedom, caveat emptor, DYOR, risk-taking, and so on and so forth?

I admit it is hard to understand how Bitcoin futures trading works, or CFDs, or ETNs, or whatever, but would you not allow your kid to take a dip in the ocean or a pool because he/she doesn't know how to swim? This ban is full of presumptions. It is over-protection. They must have assumed the people are not to be trusted and are incapable of understanding and responsibly getting into risky forms of investments. But you wouldn't just deprive a child of a bicycle so that he/she won't figure into an accident that might cause him/her scratches, would you?

[1] https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers

That's the technique used by all governments around the world so that common people never gets to know the actual reason for banning certain things. Even in my country, government is planning to ban bitcoin and any other cryptocurrency related activities in the name of consumer protection. But we all know that the government is receiving huge pressure from various banks to ban cryptocurrency. So this phrase "consumer protection" is mainly an eye-wash!