UK’s Financial Conduct Authority Assumes Control over Binary Options Regulation in Early 2018
The UK Financial Conduct Authority will assume control over the regulation of the nation’s binary options industry, the financial regulator itself announced today. The FCA also issued a warning on the growing popularity of cryptocurrency CFD investing, arguing that the activity carries a high level of risk for those engaged.
The financial regulator will take charge over the regulation of binary options from January 3, 2018. Up until now, the activity has been regulated by the UK Gambling Commission. Under the existing (and rather fuzzy) regulatory regime, binary options companies with equipment in the United Kingdom are required to obtain licenses from the gambling regulator.
As from the beginning of 2018, every company in the field interested to provide its services in the UK will be regulated by the FCA and the regulatory body will monitor whether operators are observing the rules.
The regulator said in a warning from earlier today that binary options are a “high-risk, speculative” product and that investing in those is a risky endeavor. The FCA went on to say that most customers that trade binary options are likely to suffer losses as the activity requires comprehensive experience in the field that could help them “beat the odds”.
The regulatory body also drew attention to the increasing cases of customers being scammed by brokers. The most common instances involve promises for higher returns for bets, customers being refused to be returned funds, and brokers breaking contact with their customers.
Cases of conflicts of interest have also been noted by the FCA as particularly frequent over the years. In such instances, companies a consumer buys binary options from benefit from the latter’s losses.
According to the FCA, a total of 2,605 people have reported binary options fraud in the five years since 2012. The victims were occasioned losses of £59.4 million or an average of £22,000 per person.
The FCA’s Warning about Cryptocurrency Investing
The financial authority also issued a warning about contracts for differences (CFDs) with cryptocurrencies, saying that these too are “high risk, speculative products”. The FCA said that customers should be very careful due to the volatility of cryptocurrencies, as the value of some of those plunged 30% within several hours.
The regulator went on to say that the charges for CFDs with cyrptocurrencies as the base investment were considerably higher than those for other similar products, and to warn customers that they should consider the charges when looking to invest in order to avoid great financial losses.
In the UK, cryptocurrency CFDs are regulated namely by the FCA, which means that CFD companies need to receive approval from the regulator in order to be able to operate in the country, and that customers can address it with complaints over potential fraud.
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