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Here’s why the UK and US’s crypto clampdowns won’t stop Bitcoin trading

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Here’s why the UK and US’s crypto clampdowns won’t stop Bitcoin trading 2

The sale and promotion of derivatives of bitcoin BTC and other cryptocurrencies to amateur investors is being banned in the UK by the financial regulator, the Financial Conduct Authority (FCA). It is a further blow to the burgeoning cryptocurrency market, coming days after the US authorities indicted the owners of leading crypto derivatives exchange BitMex for operating without being US-registered and allegedly failing to follow anti-money-laundering rules.

In view of recent findings from the University of Cambridge that most firms involved in crypto investments are still operating without a license, other operators are potentially vulnerable to indictments too.

It all sounds like bad news for anyone hoping that more investors will put money into cryptocurrencies. But on a closer inspection, I’m not so sure.

Drops and oceans?

The FCA is preventing retail investors from buying and selling the likes of cryptocurrency futures and options, which people often use as a way of hedging their bets on an underlying asset. For example, you might buy an option to sell a certain number of bitcoin at today’s price if the price falls by 10%, giving you an insurance policy in case the market moves against you.

The FCA said it was introducing the ban from January 6 because amateur investors were at risk of “sudden and unexpected losses”. The reasoning is that these people often don’t understand the market, there is lots of “market abuse and financial crime” in the sector, cryptocurrencies are very volatile and they are hard to value.