The European regulator for securities and markets (ESMA) is considering the regulation cryptanalytic derivatives, in particular the issue of contracts for difference (CFDs).
ESMA is exploring public opinion regarding the contracts for difference (CFDs). The controller determines, as crypto-currency CFDs will comply with the regulatory framework of the derivatives market for financial instruments (MFID).
ESMA collects information about whether the CFD-based cryptocurrencies have strict restrictions. The European regulator in a statement said:
“Currently, ESMA is discussing whether to consider the issue CFDs on crypto-currencies that exhibit very high fluctuations in prices, and whether the leverage is 5:1 to provide investors with sufficient protection. Interested, can we consider the lower limit of the leverage is 2:1 or 1:1 as an alternative. Whether to introduce more stringent measures such as the ban on the sale, distribution, or sale of CFDs for cash to retail customers”.
According to the document, a leverage of 5:1 means that the investor needs to pay only 20% of the total value of the contract. Then the broker, the investment Manager will provide the investor with a contract on the CFD.
The document notes that the leverage limit of 2:1 or 1:1 can provide better protection for investors.
At the same time, the statement ESMA clarifies that it’s safer to ban retail clients to invest in CFD. Public opinion on the issue of the regulator is interested in the most.
Last year, the Office of financial supervision and regulation in the UK (FCA) issued a warning to investors regarding CFDs cryptocurrency, calling them “extremely risky speculative investment.”