ESMA tightens regulation of derivatives trading cryptocurrencies

The European Agency for securities and markets (ESMA) have hardened their position in relation to derivative contracts for the cryptocurrency. In a statement
on Tuesday, the EU regulator announced that it has accepted the decision on the temporary adjustment of the ratio of borrowed and own funds for contracts for difference (CFD) related to cryptocurrency, to 2:1. This will require retail investors to keep on shopping a Deposit of at least 50% of the total value of the CFD.

Under the CFD, one party agrees to pay to the other party if the value of the underlying asset changes. ESMA did this step after in January of this year the beginning of an open consultation with the public, arguing that the volatility of crypto-currencies as an underlying asset for CFD is a serious problem for the protection of retail investors. Previously, the ratio of borrowed and own funds for CFD was 5:1 — investors might initially have only 20% of the total value of the contract.

In its statement, the Agency also noted that cryptocurrencies still concerned about the controller and what in the future can be taken more stringent measures for the protection of investors. ESMA said:

«Because of the specific characteristics of cryptocurrencies as an asset class, the market of financial instruments providing access to them, for example, a CFD will be monitored closely, and ESMA will assess the need to adopt more stringent measures.»

In February, ESMA warned
EU citizens of the risks of investing in cryptocurrency in the absence of legislative protection mechanisms in this area.

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