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The more rational take is that the FCA is acting to protect UK citizens from potentially dangerous financial products from an unauthorized organisation.

by d4rti 5y ago

botwriter 5y ago
ah good old nanny state, Although knowing the city of London its probably a protection racket!!!
meowkit 5y ago
Can you describe how these financial products are “dangerous”? Because they could be rug pulls? I disagree that citizens need to be “protected” from speculation. Governments should monitor markets and go after scammers when they act, not shut down the markets entirely.
- consp 5y ago
  I guess your assumption is people know what they are doing. Looking at legal bank products with derivates and who got into other speculative products in the past decades most people didn't see they were being manipulated into buying a product for which the risks where greater than they could afford. This is a different stance from the America libertarian view of "everyone is responsible for their own actions" mostly because the balance of power is greatly in favour of the companies.
  - meowkit 5y ago
    > I guess your assumption is people know what they are doing. My assumption is most people do not know what they are doing when it comes to trading equities or derivatives. There are other solutions to your concerns - namely required training explaining risks, an approval process, and not allowing derivatives to be recommended by platforms. Outright bans come from ulterior motives or incompetence. My stance is not what you have presented. If I had to briefly summarize my stance: let people make reasoned decisions for themselves, and provide safeguards to mitigate the most common accidents.
  - 3np 5y ago
    Notable that US legislation does not take this “America libertarian view”. Like how a huge class of investments are not legally accessible to anyone who’s not an “accredited investor”, with requirements such as 1M$ net worth.
- MikeDelta 5y ago
  The problem is not speculation or market risk, but leverage. Say you covert 1000 USD into BTC, and you can convert back without costs. If BTC goes up 100%, you should be able to get back 2000 USD. If BTC goes to 0, you get zero. Leverage is 1 as your return relates 1:1 to the return on BTC. Now let's look at leverage, say we take a leverage of 100 (not a crazy amount). This means that your return in USD goes 100x the return in BTC, so if BTC goes up 1% you earn 100% (and walk away with 2000 USD). It also means that if BTC goes down 1%, you lose everything. The other thing is that if you have insufficient margin, the venue close down your position by putting it on the market. If BTC has a short dip and quickly recovers, the venue will have closed down your position at the point where you lost your margin (all your money). This can be exactly the -1%, but depends on the market and the liquidity. If BTC will go up 10% but does so in a noisy way, you might be right but the venue could have closed down your position the moment BTC touched -1% during the random movements. Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. So, in a nutshell, with unleveraged investing you can lose everything, but with leveraged investing you can end up in serious debt.
  - csomar 5y ago
    > Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. Losses in the Crypto world are limited to the amount of capital you put in a certain position. This has the side effect of (maybe) not collecting the full amount on the up-side. Pretty much all exchanges do this, since it's almost impossible to go after individuals when they go bankrupt. Now the popular derivatives frameworks have sizable insurance funds for such events; but clawbacks are a thing in the crypto world.
- Symbiote 5y ago
  Look at something like https://cashasap.co.uk/ https://cashasap.co.uk/ "WARNING: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk" "Representative Example: £250 loan for 3 months at a fixed interest rate of 290% pa. Total amount payable is £321.51" Or at https://www.ig.com/uk/spread-betting https://www.ig.com/uk/spread-betting "71% of retail investor accounts lose money when trading spread bets and CFDs with this provider." Or even https://www.vanguardinvestor.co.uk/investing-explained/investment-account-types https://www.vanguardinvestor.co.uk/investing-explained/inves... "Please remember that the value of investments can go down as well as up and you may get back less than you invest." It's the opinion of British society that citizens _do_ need to be protected in this way.
  - celticninja 5y ago
    > It's the opinion of British society that citizens _do_ need to be protected in this way. I would replace 'protected' with 'warned'. You can still do it but as long as you have been informed correctly beforehand then you are taking a risk with the knowledge it could go tits up.
FreeSpeech 5y ago
It's coronation disguised as regulation. Casinos and fruit machines are moral, but crypto is not?
- headmelted 5y ago
  Not going to speak on the FCA’s motives but this is a pretty easy ruling for them to defend. If as the article states the exchange itself is promising certain returns then it doesn’t comply with the law and absolutely is breaking the rules. Financial products in the UK (and most other markets) can’t advertise any returns that aren’t guaranteed without pretty clear and specifically worded disclaimers. The FCA isn’t singling anyone out in applying this rule here that I can see. As per usual, the upshot here is that most crypto holders still think these are all new concepts and don’t realise that the rules are based on hundreds of years of experiences and consequences.
  - ipnon 5y ago
    I 100% agree with you that the regulators have the legal advantage here but I am less convinced of the public benefit. The popularity of Binance must indicate some demand for the product.
    - Qworg 5y ago
      There are many popular things that are not in the public benefit, usually things that have socialized losses and indeterminate assignation of costs.
    - AndrewDucker 5y ago
      Of course there's demand for returns that are higher than the norm! But unless they can guarantee those returns they're acting fraudulently. "There's demand for my perpetual motion machine!" is not a good argument.
      - celticninja 5y ago
        They are only acting fraudulently if they say those returns are guaranteed and then dont guarantee them. AFAIK there was no claims that returns are guaranteed. What they have said is Binance cant offer regulated offerings such as derivatives and options, for which a licence from the FCA is required. Those licenses are given out easily enough to places like plus500 wc. They are essentially gambling, you dont buy securities/assets/stocks/currencies you just bet on price movements of those items.
lowkey 5y ago
I think you may have just restated GP’s comment in Newspeak as explained by a banker from the City of London /s
dig1 5y ago
Yet, they allow spread betting and CFDs, which are considered not less dangerous and are banned in many countries.
- xwolfi 5y ago
  So Binance can just register normally
oarsinsync 5y ago
> The more rational take is that the FCA is acting to protect UK citizens from potentially dangerous financial products from an unauthorized organisation. The keyword in your statement is 'unauthorised'. The FCA rarely acts to protect UK citizens from potentially dangerous financial products from authorised regulations. The last time I'm aware of, to ensure that retail gamblers cannot lose more than they stake in highly leveraged bets, was pushed through by ESMA, not the FCA. EDIT: added the post I was responding to, to add context.
- mytailorisrich 5y ago
  > The FCA rarely acts to protect UK citizens from potentially dangerous financial products from authorised regulations. The job of the FCA, and of regulations in general, is not to shield people from risk and losses, it's to prevent scams and to make sure people are informed of the rules and of the risks. Basically the law is not there to prevent people from making bad decisions, it's there to ensure that they can make informed decisions.
  - makomk 5y ago
    The whole reason that regulators had to step in was that companies absolutely were pushing these kind of complex, high-risk non-cryptocurrency financial products to ordinary consumers that didn't understand how they worked as a way to make money fast, through ads in mainstream places like YouTube.
    - oarsinsync 5y ago
      Or on the front of football players shirts, in the form of sponsorships.
- mschuster91 5y ago
  > The last time I'm aware of, to ensure that retail gamblers cannot lose more than they stake in highly leveraged bets, was pushed through by ESMA, not the FCA. Same here in Germany. We don't have access to US-style stonk options, to the great frustration of people seeing US redditors making bank with GameStop while all we had was hodl'ing the stock itself.
csomar 5y ago
> FCA is acting to protect UK citizens More like protect their position as regulator. The UK (London) is home to many CFD exchanges which are more scammy (almost 100% scammy) compared to Binance (which is a legitimate exchange that happens to be dangerous to use if you don't know what you are doing).
- helsinkiandrew 5y ago
  > that happens to be dangerous to use if you don't know what you are doing Exactly, Binance was heavily advertising on London Transport to people who probably don't know what they were doing: https://news.bitcoin.com/uk-bans-time-to-buy-bitcoin-ads-buses-underground/ https://news.bitcoin.com/uk-bans-time-to-buy-bitcoin-ads-bus...
  - d4rti 5y ago
    And on YouTube targeting the UK market.
dna_polymerase 5y ago
That would be the least plausible explanation of these events.

The more rational take is that the FCA is acting to protect UK citizens from potentially dangerous financial products from an unauthorized organisation.

by d4rti 5y ago

The more rational take is that the FCA is acting to protect UK citizens from potentially dangerous financial products from an unauthorized organisation.

botwriter 5y ago

ah good old nanny state, Although knowing the city of London its probably a protection racket!!!

meowkit 5y ago

Can you describe how these financial products are “dangerous”? Because they could be rug pulls? I disagree that citizens need to be “protected” from speculation. Governments should monitor markets and go after scammers when they act, not shut down the markets entirely.

consp 5y ago
I guess your assumption is people know what they are doing. Looking at legal bank products with derivates and who got into other speculative products in the past decades most people didn't see they were being manipulated into buying a product for which the risks where greater than they could afford. This is a different stance from the America libertarian view of "everyone is responsible for their own actions" mostly because the balance of power is greatly in favour of the companies.
- meowkit 5y ago
  > I guess your assumption is people know what they are doing. My assumption is most people do not know what they are doing when it comes to trading equities or derivatives. There are other solutions to your concerns - namely required training explaining risks, an approval process, and not allowing derivatives to be recommended by platforms. Outright bans come from ulterior motives or incompetence. My stance is not what you have presented. If I had to briefly summarize my stance: let people make reasoned decisions for themselves, and provide safeguards to mitigate the most common accidents.
- 3np 5y ago
  Notable that US legislation does not take this “America libertarian view”. Like how a huge class of investments are not legally accessible to anyone who’s not an “accredited investor”, with requirements such as 1M$ net worth.
MikeDelta 5y ago
The problem is not speculation or market risk, but leverage. Say you covert 1000 USD into BTC, and you can convert back without costs. If BTC goes up 100%, you should be able to get back 2000 USD. If BTC goes to 0, you get zero. Leverage is 1 as your return relates 1:1 to the return on BTC. Now let's look at leverage, say we take a leverage of 100 (not a crazy amount). This means that your return in USD goes 100x the return in BTC, so if BTC goes up 1% you earn 100% (and walk away with 2000 USD). It also means that if BTC goes down 1%, you lose everything. The other thing is that if you have insufficient margin, the venue close down your position by putting it on the market. If BTC has a short dip and quickly recovers, the venue will have closed down your position at the point where you lost your margin (all your money). This can be exactly the -1%, but depends on the market and the liquidity. If BTC will go up 10% but does so in a noisy way, you might be right but the venue could have closed down your position the moment BTC touched -1% during the random movements. Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. So, in a nutshell, with unleveraged investing you can lose everything, but with leveraged investing you can end up in serious debt.
- csomar 5y ago
  > Eveb worse, say that BTC drops 10% in a very rapid move because of some tough news and panic. The venue puts the orders to sell your position at the -1% mark but because of lack of liquidity these orders get filled at -10% and your loss becomes 10.000 USD. Even if BTC recovers quickly, you keep your loss because the position is closed. That is the problem. Losses in the Crypto world are limited to the amount of capital you put in a certain position. This has the side effect of (maybe) not collecting the full amount on the up-side. Pretty much all exchanges do this, since it's almost impossible to go after individuals when they go bankrupt. Now the popular derivatives frameworks have sizable insurance funds for such events; but clawbacks are a thing in the crypto world.
Symbiote 5y ago
Look at something like https://cashasap.co.uk/ https://cashasap.co.uk/ "WARNING: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk" "Representative Example: £250 loan for 3 months at a fixed interest rate of 290% pa. Total amount payable is £321.51" Or at https://www.ig.com/uk/spread-betting https://www.ig.com/uk/spread-betting "71% of retail investor accounts lose money when trading spread bets and CFDs with this provider." Or even https://www.vanguardinvestor.co.uk/investing-explained/investment-account-types https://www.vanguardinvestor.co.uk/investing-explained/inves... "Please remember that the value of investments can go down as well as up and you may get back less than you invest." It's the opinion of British society that citizens _do_ need to be protected in this way.
- celticninja 5y ago
  > It's the opinion of British society that citizens _do_ need to be protected in this way. I would replace 'protected' with 'warned'. You can still do it but as long as you have been informed correctly beforehand then you are taking a risk with the knowledge it could go tits up.

FreeSpeech 5y ago

It's coronation disguised as regulation. Casinos and fruit machines are moral, but crypto is not?

headmelted 5y ago
Not going to speak on the FCA’s motives but this is a pretty easy ruling for them to defend. If as the article states the exchange itself is promising certain returns then it doesn’t comply with the law and absolutely is breaking the rules. Financial products in the UK (and most other markets) can’t advertise any returns that aren’t guaranteed without pretty clear and specifically worded disclaimers. The FCA isn’t singling anyone out in applying this rule here that I can see. As per usual, the upshot here is that most crypto holders still think these are all new concepts and don’t realise that the rules are based on hundreds of years of experiences and consequences.
- ipnon 5y ago
  I 100% agree with you that the regulators have the legal advantage here but I am less convinced of the public benefit. The popularity of Binance must indicate some demand for the product.
  - Qworg 5y ago
    There are many popular things that are not in the public benefit, usually things that have socialized losses and indeterminate assignation of costs.
  - AndrewDucker 5y ago
    Of course there's demand for returns that are higher than the norm! But unless they can guarantee those returns they're acting fraudulently. "There's demand for my perpetual motion machine!" is not a good argument.
    - celticninja 5y ago
      They are only acting fraudulently if they say those returns are guaranteed and then dont guarantee them. AFAIK there was no claims that returns are guaranteed. What they have said is Binance cant offer regulated offerings such as derivatives and options, for which a licence from the FCA is required. Those licenses are given out easily enough to places like plus500 wc. They are essentially gambling, you dont buy securities/assets/stocks/currencies you just bet on price movements of those items.

lowkey 5y ago

I think you may have just restated GP’s comment in Newspeak as explained by a banker from the City of London /s

dig1 5y ago

Yet, they allow spread betting and CFDs, which are considered not less dangerous and are banned in many countries.

xwolfi 5y ago
So Binance can just register normally

oarsinsync 5y ago

> The more rational take is that the FCA is acting to protect UK citizens from potentially dangerous financial products from an unauthorized organisation. The keyword in your statement is 'unauthorised'. The FCA rarely acts to protect UK citizens from potentially dangerous financial products from authorised regulations. The last time I'm aware of, to ensure that retail gamblers cannot lose more than they stake in highly leveraged bets, was pushed through by ESMA, not the FCA. EDIT: added the post I was responding to, to add context.

mytailorisrich 5y ago
> The FCA rarely acts to protect UK citizens from potentially dangerous financial products from authorised regulations. The job of the FCA, and of regulations in general, is not to shield people from risk and losses, it's to prevent scams and to make sure people are informed of the rules and of the risks. Basically the law is not there to prevent people from making bad decisions, it's there to ensure that they can make informed decisions.
- makomk 5y ago
  The whole reason that regulators had to step in was that companies absolutely were pushing these kind of complex, high-risk non-cryptocurrency financial products to ordinary consumers that didn't understand how they worked as a way to make money fast, through ads in mainstream places like YouTube.
  - oarsinsync 5y ago
    Or on the front of football players shirts, in the form of sponsorships.
mschuster91 5y ago
> The last time I'm aware of, to ensure that retail gamblers cannot lose more than they stake in highly leveraged bets, was pushed through by ESMA, not the FCA. Same here in Germany. We don't have access to US-style stonk options, to the great frustration of people seeing US redditors making bank with GameStop while all we had was hodl'ing the stock itself.

csomar 5y ago

> FCA is acting to protect UK citizens More like protect their position as regulator. The UK (London) is home to many CFD exchanges which are more scammy (almost 100% scammy) compared to Binance (which is a legitimate exchange that happens to be dangerous to use if you don't know what you are doing).

helsinkiandrew 5y ago
> that happens to be dangerous to use if you don't know what you are doing Exactly, Binance was heavily advertising on London Transport to people who probably don't know what they were doing: https://news.bitcoin.com/uk-bans-time-to-buy-bitcoin-ads-buses-underground/ https://news.bitcoin.com/uk-bans-time-to-buy-bitcoin-ads-bus...
- d4rti 5y ago
  And on YouTube targeting the UK market.

dna_polymerase 5y ago

That would be the least plausible explanation of these events.