Paul-Willem van Gerwen is the head of Capital Market Structure and Transparency Supervision at the Netherlands Authority for the Financial Markets (AFM). During the Amsterdam Proprietary Trading Manager’s Meeting event he showed in a speech know that it might be a good idea to ban individuals from trading crypto derivatives.
Crypto Derivatives
According to van Gerwen it is within the world of the crypto derivatives trade full of evil. For example, market manipulation would take place on a large scale and there is a total lack of transparency. According to van Gerwen, the risks involved are very great. For that reason, trading in crypto derivatives for individuals should be banned.
Although there is indeed market manipulation, one can question the other two claims of van Gerwen. It is arguable that a lot of criminal activity is involved in the trade in derivatives. In addition, the transparency of crypto derivatives, compared to more traditional derivatives, may not be as problematic as van Gerwen argues.
According to van Gerwen, the crypto derivatives market is simply too immature. The popularity of crypto derivatives does not match the extent to which this market has already matured. According to van Gerwen, this leads to major problems.
“In general, the crypto derivatives market has not yet reached the same level of maturity as the other derivatives markets. And while the markets, as you state, are exciting and fast-growing, they are also highly volatile and fraught with risk.[…] After all, with price changes – which can be extreme when it comes to cryptos – the question is whether the parties to the derivatives transaction will be able to deliver on their promises, as we have seen recently.”
Limit bitcoin derivatives trading for individuals
All these matters are reason enough for Van Gerwen to argue for a ban on trading crypto derivatives for private individuals traders† According to him, the AFM should take an example from the financial authorities in the United Kingdom. The FCA has previously restricted private individuals there to wholesale trade.
If van Gerwen’s proposal eventually leads to concrete policy, this would of course be very bad news for Dutch crypto traders.