Binary Options Taken Over by FCA Following Scams

BusinessBinary Options Taken Over by FCA Following Scams

Binary Options Taken Over by FCA Following Scams

The Financial Conduct Authority (FCA) is taking over binary options regulation in response to £59.4 million having been scammed out of 2,605 victims over the last 5 years. The FCA issued a statement underscoring binary options regulation as of next year and that businesses operating within that industry no longer require the U.K. Gambling Commission’s licensing.

Consumers Trading Binary Options Typically Lose Money

The reason binary options trading that composed the majority of the FCA’s communiqué is that this type of practice not only leads consumers to lose money in the vast majority of this product’s trading, but that it is highly associated with the development of addiction.
Compounding the problem is that binary options trading has left the door wide open to fraud and conflicts of interest between brokers and clients. The FCA shared that since 2012, there have been an estimated 2,605 victims who have lost £59.4 million to this type of scam. On average, each victim lost more than £22,000.

The U.K. Gambling Commission Formerly Regulated Binary Options Trading

That said, the commission regulated binary options only among companies with equipment located within the United Kingdom. However, as of 3 January 2018, the FCA will be regulating companies offering binary options in the country.
Clients seeking to file a complaint will do so with the Financial Ombudsman Service and will be able to access the Financial Services Compensation Scheme (FSCS).

The FCA Also Cautioned Against Cryptocurrency Stability

The watchdog underscored the risks cryptocurrencies present to consumers as a result of their continually spiking and crashing prices. It pointed out that some companies offer high leverage of as much as 1:50 in certain cases.
As a result of this and the risk of market gaps, the FCA has labeled cryptocurrencies as being “extremely high risk” to retail investors.
For example, Bitcoin’s price recently plummeted by 30 percent in a span of only hours. The FCA pointed out that this calls to mind the negative balance causing SNB crisis. It stated that the practice of leveraging these products could lead customers to lose a greater amount than his or her balance. It also shared that price data sources are questionable as there is a larger chance of obtaining an inaccurate price for cryptocurencies.
Unlike with binary options, where the FCA will be taking over regulation, with cryptocurrency, the watchdog has issued a warning to providers. All too many participants in the market are under the impression that the FCA regulates cryptocurrencies, boosting their confidence in such investments. However, this regulation is only to a very small degree, so it has cautioned brokers that they should not suggest that the level of governance is greater than it is. Clients must be offered adequate “disclosure and protections,” said Ashurst law firm regulation partner Jake Green.