The European Securities and Markets Authority (ESMA), the European Union’s financial market regulator, has issued a warning regarding cryptocurrencies.
Accordingly, ESMA warned that leveraged cryptocurrency products could face regulation. According to ESMA, cryptocurrency perpetual futures derivatives will most likely be subject to CFD rules.
At this point, ESMA issued a warning reminding institutions that they should re-evaluate investment instruments that provide leveraged access to cryptocurrencies.
EU regulator ESMA has stated that derivative products linked to cryptocurrencies such as Bitcoin and Ethereum (e.g., perpetual futures and perpetual contracts) could fall under the European Union’s Contract for Difference (CFD) regulation.
ESMA also added that companies should identify potential conflicts of interest that may arise when offering these products.
This classification will impose strict leverage limits on retail customers. Leverage limits may also be subject to existing regulations, including mandatory risk warnings and mandatory collateral liquidations.
*This is not investment advice.
