One of the largest cryptocurrency liquidity providers in the United Kingdom, B2C2, has been given regulatory approval from the Financial Conduct Authority (FCA) to launch a cryptocurrency-backed Contract for Difference (CFD) with eligible counterparties and professional clients. This is the first time the FCA has given approval for CFD in the crypto-world.
What Is A Cryptocurrency Backed CFD?
A CFD is an arrangement made in a futures contract where differences in settlement are made through cash payments, rather than by the delivery of physical goods or securities. This is generally an easier method of settlement, because both losses and gains are paid in cash. CFDs provide investors with the all the benefits and risks of owning a security without actually owning it.
This ruling has come as a surprise as the FCA has previously warned consumers about the risks of investing in cryptocurrency CFDs. Citing high volatility and a lack of transparency as reasons for why crypto derivatives are unsafe for retail investors and that they are increasingly being marketed to consumers, they said: “These products are extremely high-risk, speculative products. This warning is to inform consumers about the risks of buying them”.
B2C2, established in 2015, quickly became a leader in electronic over-the-counter (OTC) trading in the cryptocurrency space. In October last year, the firm partnered with crypto-trading and risk management platform Caspian in an effort to give their customers greater exposure to digital assets. B2C2 helped establish the University of Oxford’s Centre for Technology and Global Affairs and is a member of CryptoUK, the first self-regulatory trade association for the UK cryptocurrency industry. “We are excited to have received authorisation from the FCA to introduce a cryptocurrency CFD product” said Max Boonen, Founder and CEO of B2C2. “Eligible counterparties and professional clients can now gain derivative exposure to the cryptocurrency markets, benefiting from the competitive pricing and liquidity they’re accustomed to receiving from B2C2 while avoiding the risks associated with crypto custody”.