Forex vs crypto: which one is safer from a regulatory perspective?
It’s important to note that both the forex and cryptocurrency market aren’t regulated by the same authority. The forex market is OTC, which involves numerous transactions among several market participants such as central banks and investment funds and is heavily regulated.4
For instance, in the UK, brokers like us who trade forex markets are regulated by the Financial Conduct Authority (FCA). This industry body works closely with the Bank of England to ensure that brokers create and promote an environment that places the interest of the traders ahead of their own.5
Buying and owning cryptocurrency is allowed in the UK. However, since 6 January 2021, the FCA has banned the trade of crypto derivatives and exchange traded notes that reference certain digital or cryptocurrency assets to retail consumers. The UK regulators only enable professional traders or institutional firms with a history to access these riskier financial products.
The FCA’s reasons for banning cryptocurrencies were that the digital asset had unreliable valuations, had a prevalence of market abuse and financial crimes, as well as increased volatility of cryptocurrency price movement. The regulatory body further said retail consumers had inadequate understanding of how the cryptocurrency market works, and there weren’t legitimate requirements for them to invest in the derivatives.6