The British Financial Conduct Authority (FCA) under the conservative government of Boris Johnson has decided to spend their time trolling bitcoin, stating:
“There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.”
This pathetic statement comes as justification for FCA’s decision to ban stock traded bitcoin products, the first country in the world to do so.
“The FCA’s decision means UK based retail investors who want exposure to bitcoin and other cryptoassets will have to manage their own storage, which could increase their risk of losing keys and becoming a victim of cyber-crime,” said Bradley Duke, CEO of crypto firm ETC Group, further adding.
“It also removes the ‘safety-net’ for retail investors that is provided by the suitability guidance of investment advisors when assessing the risk appetite and profile of their clients for these regulated products. Investors who want to gain access to this asset class are now left with less secure ways to invest in Bitcoin.”
FCA knows far better than these highly educated trained and licensed financial advisors even though their statements show no awareness of numerous studies that have found bitcoin or ethereum increase risk adjusted returns.
For bitcoin a study found substituting bitcoin for gold can achieve higher risk adjusted returns, with these just two of numerous studies finding bitcoin is a diversifier and a hedge.
FCA however claims there’s “inherent difficulties in valuing cryptos reliably,” which contradicts their statement its value is based on demand and supply because in the case of the latter, growing demand means higher value.
As with anything else you can’t know whether demand has grown before it has grown, unless you have information to suggest so.
Unlike stocks however this growth or fall in demand is not separated from the price, making it directly reflect.
As stocks are a completely artificial construct, the growth of a company or its decline needs not be reflected at all in the price of a stock, but it tends to because investors think all others will take it into account or because companies sometime use profits to buy the stock.
In bitcoin this disassociation and distortion is not possible because the growth in the bitcoin ecosystem necessarily means one has to buy bitcoin while the growth in a company does not mean you have to buy its stock.
Thus, this is more FCA saying putting a value to a diamond is difficult and therefore since you’re the Queen’s subjects, you should not buy it at all and if you want to ignore our advice, take this ban.
“By banning crypto derivatives, the FCA is basically indicating that they don’t know how to regulate this. The FCA has chosen to abdicate rather than lead,” says Dermot O’Riordan of blockchain investor Eden Block.
It’s not very clear whether it’s FCA making such choices. It may well be Boris Johnson himself, the self-proclaimed libertarian who by his acts is beginning to sound more like an authoritarian nationalist.
As with Trump who didn’t like bitcoin, Johnson maybe doesn’t either, unlike David Cameron and George Osborne whose more enlightened strand of conservatism gave London the crown of the financial capital of the world.
The then very friendly FCA thus has now become a trolling FCA, telling the very educated Brits that “the complexity of some products and services relating to cryptoassets can make it hard for consumers to understand.”
How dare these bureaucrats of second or third rate education tell us we don’t have the capacity to comprehend!
Go home FCA, you’re drunk, and stop embarrassing yourself because the reputation of London is already being rekt by your complete failure to secure any rights for financial services in the biggest single market in the world. Not even the recognition of accreditations!