Why is the UK thinking of banning crypto derivatives?

Britain's foremost financial watchdog, the Financial Conduct Authority, is contemplating a blanket-ban on cryptocurrency derivatives for retail traders as early as 2020, The Economist reported.

Thursday, the FCA held a consultation on the matter, purportedly in response to recent market "Tantrums," said the Economist, such as September 24th's liquidation of $643 million long contracts on Bitcoin derivatives giant BitMEX. A final outcome is expected in early 2020.The Economist: crypto not fit for currency or derivatives.

Derivatives need not reliably store value, serve as a unit of account, or be widely accepted.

Wheat, one of the longest-traded derivatives in the history of modern markets, would not meet any of The Economist's qualifications.

Simply, derivatives are securities derived from underlying assets including stocks, bonds, commodities, interest rates, and currencies.

The trading of derivatives for speculation, by institutional and retail traders, is as common a purpose.

The value of a derivative, as the name suggests, is derived from the expected value of its underlying asset.

For all intents and purposes Bitcoin is the only substantive cryptocurrency derivative, and admittedly as a nascent asset its market paradigms are still developing.

The value of gold, perhaps Bitcoin's closest real-world equivalent in the derivatives market, is decided primarily by public sentiment, inflation rates and interest rates of fiat currency, and mining costs, which affect supply and demand.

Bitcoin is comparably volatile to oil, one of the most the most commonly traded derivatives in the world, and may be on track to be less volatile within years if its current trajectory continues.