Ban Retail from Trading Crypto Derivatives Says Dutch Finance Official

A Dutch financial official has suggested banning retail investors from trading crypto derivatives.

Paul-Willem van Gerwen, an executive at The Netherlands Authority for the Financial Markets, offered his thoughts on crypto derivatives in a speech at the Amsterdam Propriety Traders Managers Meeting.

He cites market manipulation, illicit financial activity, and a lack of transparency as reasons for the proposed ban.

Van Gerwen believes that crypto derivatives are popular products that entail risks, listing out a lack of transparency, market manipulation, and “other forms of criminal activity.” 

These are the most common arguments posed against the crypto market in general, though while the second has some weight to it, the other two are more tenuous.

He also says that there is a disparity between the popularity of the derivatives and the level of maturity in the market.

“In general the crypto derivatives market hasn’t yet reached the same level of maturity as the other derivatives markets. And although, as you put it, the markets are exciting and fast-growing, they’re also highly volatile and fraught with risk.

“After all, in the case of price changes – which can be extreme when it comes to cryptos – the question is whether the parties to the derivative transaction will be in a position to fulfill their promises, as we saw recently,” he said.

As such, he calls for crypto derivative products to be limited to wholesale trades. He points to the United Kingdom’s FCA banning them. In addition, van Gerwen also commented on the impact of blockchain technology on clearing, saying that he does not see it being as good as touted.

Regardless, crypto derivatives grow

Crypto derivatives are very popular in the market, though they are risky investments that can result in heavy losses. Their popularity has seen even big names enter the market – Goldman Sachs made its first OTC crypto trade in the derivatives market in March.

Some, like FTX CEO Sam Bankman-Fried, have said that the market is misunderstood. The argument is that they provide liquidity and make markets more efficient.

Numerous exchanges are also gearing up to enter the market. Coinbase has filed for futures and derivatives trading, while FTX US plans to offer them this year.