The United Kingdom regulator the FSA has recently announced a ban on the trading of “virtual currency”. Cryptocurrency is a form of digital money that exists only in the virtual world. There are three main types of this type of trading, which are BitShares, Forex, and Litecoin.
The FSA stated that its new regulation would ban the trading of all forms of virtual currencies such as Litecoin. The decision was made because the trading in virtual currencies posed a significant risk to the financial system of the United Kingdom. The FSA has indicated that it will continue to investigate all trading activities involving Virtual Currency, as it considers these to be high risk investments. It does not, however, intend to restrict the trading of BitShares or Forex.
Since there is no central exchange, it is impossible to regulate the rates of the market. Therefore, a trading firm can increase the rate and make profits from the increased demand. In this case, a trader may have to deal with the consequences, either through higher costs of trading, or reduced gains.
In the United States, there is already a ban on the trading of certain types of virtual currencies such as those sold by Mt Gox, the largest online exchange of this type. This decision has had the effect of making the trading of this kind of virtual currency difficult.
The UK regulator also stated that the ban would apply to those who deal with the virtual currencies through brokerages and online trading platforms, and who are based in the UK. However, since these virtual currencies are not considered securities under the law, they are not subject to the same laws and regulations as traditional forms of trading.
In addition to the ban, there are also restrictions to be followed by traders in relation to their use of these types of UK regulated virtual currencies. For instance, they are prohibited from selling more than 50% of their cash reserves in one transaction. This means that any trades exceeding this amount would require a broker to inform the customer that they have exceeded the limits. This restriction is meant to ensure that the risk associated with trading in such virtual currencies is reduced.
The FSA has further stated that anyone who breaches these restrictions will face possible criminal prosecution. and penalties can include fines and suspension or closure of trading accounts.
Cryptocurrency trading is likely to increase as the UK economy suffers from the economic slowdown. In response to this, the FSA has released this statement to discourage traders and consumers from engaging in trading in this form of trading.