On Thursday, the UK’s Financial Conduct Authority (FCA) published a cautionary note about Olsson Capital, a Bulgarian firm that has been offering cryptocurrency-linked financial products in the United Kingdom without authorization.
On March 29, 2018, the United Kingdom's financial markets regulator, the Financial Conduct Authority (FCA), issued a warning about Olsson Capital, an unlicensed foreign exchange and broker of cryptocurrency contracts for differences (CFDs) based in Sofia, Bulgaria.
"This firm is not authorised by us and is targeting people in the UK," said the FCA. "Based upon information we hold, we believe it is carrying on regulated activities which require authorisation."
In November 2017, the FCA highlighted the risks[1] of cryptocurrency CFDs in particular. The regulator called the financial product "an extremely high-risk, speculative investment," citing concerns about price volatility, leverage, charges, and funding costs as well as price transparency.
Leverage is the amount of money that a person is allowed to borrow based on how much they have deposited into their account. The higher one's leverage, the higher the multiple of gains (or losses) for a given financial product.
Earlier this week, ETHNews reported on the European Securities and Markets Authority's decision to limit cryptocurrency CFDs[2] to 2:1 leverage. This would mean that a person who deposited $100 in their account would be able to control $200 worth of the relevant financial instrument. Although this amplifies the potential for profit, it also compounds losses, so a person can lose more than their initial deposit.
Previously, some brokerages had offered cryptocurrency CFDs with leverage as high as 50:1. That would have meant that a trader could control $5,000 with just a $100 investment (clearly, not for the faint of heart, or neophytes).
Source[3]
Although the FCA has censured Olsson Capital, the website still appears to be available to potential customers based in the United Kingdom.
Unfortunately, this is just the nature of the international cryptocurrency market today. Even if one jurisdiction shuts down an operation, that doesn't mean that the unregistered service will just disappear.
Matthew is a writer with a passion for emerging technology. Prior to joining ETHNews, he interned for the U.S. Securities and Exchange Commission as well as the OECD. He graduated cum laude from Georgetown University where he studied international economics. In his spare time, Matthew loves playing basketball and listening to podcasts. He currently lives in Los Angeles. Matthew is a full-time staff writer for ETHNews.
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References
- ^ highlighted the risks (www.ethnews.com)
- ^ limit cryptocurrency CFDs (www.ethnews.com)
- ^ Source (www.olssoncapital.com)
- ^ Editorial Policy (www.ethnews.com)
- ^ Twitter @ETHNews_ (twitter.com)
