European Regulator Renews Restrictions on Crypto-Based Derivatives

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Europe’s securities watchdog, ESMA, has decided to extend the restrictions applied to a number of financial derivatives, including contracts-for-differences (CFDs) based on cryptocurrencies. The limits that were introduced in August of this year will now remain in place until the end of January 2019. 

ESMA Concerned About CFDs Offered to Retail Clients

The European Securities and Markets Authority (ESMA) has taken steps to renew the restrictive measures imposed on the marketing, distribution, and sale of contracts-for-differences (CFDs) to retail customers. The restrictions were enforced on August 1 and according to the regulator’s latest decision, will be extended for another three-month period, starting from November 1.

In a press release, ESMA says it has “carefully considered the need to extend the intervention measure currently in effect.” The Paris-headquartered agency believes that “a significant investor protection concern related to the offer of CFDs to retail clients continues to exist.” That’s why a renewal of the limitations has been agreed by its Board of Supervisors on Wednesday, September 26, the regulatory body said in the announcement posted on its website this Friday.

The restrictions include the obligation to maintain leverage limits on the opening of a position by a retail client. These vary depending on the volatility of the underlying assets: 30:1 for major currency pairs; 20:1 for non-major currency pairs, gold, and major indices; 10:1 for commodities other than gold and non-major equity indices, and 5:1 for individual equities and other reference values. For cryptocurrency-based products, the leverage is limited at 2:1. These restrictions will be valid until January of next year.

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