The Financial Conduct Authority (FCA) has published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of cryptoassets to retail consumers.
The FCA believes that these products cannot be reliably valued by retail consumers because of the:
In turn, the FCA believes that the above features mean that retail consumers might suffer harm from sudden and unexpected losses if they invest in these products.
In order to address these harms, the FCA has introduced rules banning the sale, marketing and distribution to all retail consumers of any derivatives (ie contract for difference – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.
There are more ways a portfolio can have exposure to cryptocurrency than just by directly purchasing coins. It’s for this reason, institutional investors may have more exposure to cryptocurrency risk than they initially realise. This exposure can come both directly and indirectly as outlined in the diagram below.
Institutional investors may be experiencing a “creeping” exposure to cryptocurrency, as new companies built around the asset class are added to indexes and older, established companies invest in cryptocurrency.
Exposure can come from firms directly involved in the buying and selling of crypto, or from firms with an allocation of cryptocurrency on their balance sheets. Additionally, exposure can come from newly added companies to an index that engage in crypto, or when companies that are already part of an indexes constituents begins engaging in cyrpto currencies.
As cryptocurrency continues to gain global market share, there is a growing need for compliance officers to ensure they have a solution in place to monitor exposure to the crypto space.
Our Crypto Exposure Monitoring system assists firms in identifying their exposure both directly and indirectly to Crypto Assets such as Bitcoin (BTC), Ethereum Ether (ETH), Bitcoin Cash (BCH), Ripple (XRP), Litecoin (LTC), Stellar Lumens (XLM) and EOS (EOS) and indices of Crypto Assets.
Crypto exposure can be monitored based on absolute limits, exposure and warnings.
