EU Markets Regulator Extends Restrictions for Selling Crypto-Based Derivatives

Published on by Cointele | Published on

The European Securities and Markets Authority has decided to extend its restrictions on contracts for differences, including crypto-based ones.

A CFD is a contract signed between a buyer and a seller, which stipulates that the difference between the current value of an asset and its value at contract time will be compensated by the seller if positive, or by the buyer if negative.

The agency has justified its move by "Significant investor protection concern" associated with the offering of CFDs to retail clients.

As Cointelegraph reported earlier, before the first restrictions were imposed by ESMA, the leverage limit for cryptocurrency CFDs was at 5:1.

In January, ESMA issued a Call for evidence which considered a possible interference with digital coin CFDs. The paper stated that the volatility of cryptocurrency prices raised doubts about sufficient investor protection.

In March, ESMA strengthened its requirements for CFDs. "Due to the specific characteristics of cryptocurrencies as an asset class the market for financial instruments providing exposure to cryptocurrencies, such as CFDs, will be closely monitored, and ESMA will assess whether stricter measures are required," the watchdog explained back then.

Other EU regulators have also treated crypto investing with caution.

Different EU countries are seeking ways to approach crypto derivatives.

French stock market regulator urged to regulate crypto assets under EU law and prohibited to advertise them online.

A UK watchdog has required businesses to receive authorization before dealing with crypto derivatives.