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Dutch AFM official gearing up to ban retail digital currency derivatives

The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten or AFM) could be gearing up to ban retail investors from trading digital currency derivatives. This is according to recent comments made by Paul-Willem van Gerwen, a senior official of the Dutch financial market regulator. 

In a keynote speech given at the Amsterdam Propriety Traders managers meeting, Gerwen spoke on the rise and impact of digital currency derivatives. He noted that the instrument has become highly popular among asset managers who consider it “highly exciting.” 

However, the official, who heads the AFM’s Capital Markets and Transparency Supervision unit, told the managers that the regulator does not share their sentiment. The AFM considers digital assets to possess risks such as “lack of transparency, manipulation and other forms of criminal activity.” 

He also noted that the market’s volatility carries risks as well. Gerwen warned that asset managers should not dabble in offering the instrument to retail investors. The Netherlands may consider following in the footsteps of the U.K.’s Financial Conduct Authority (FCA) if it found the move necessary, he added. 

“I maintain that the trade in crypto derivatives should be restricted to wholesale trade… Don’t get caught up in the excitement of this trading, don’t let yourself be tempted into retail trading,” Gerwen said. 

Gerwen’s comments are coming after the Dutch financial market regulator warned market participants about the risks of trading digital currencies in general. The AFM noted that its authority over the industry is limited; hence investors will be left to bear any losses they uncured. 

Future of Dutch digital currency industry still uncertain 

Notably, the AFM has been issuing warnings to retail investors about digital currencies since 2017. A proper regulatory framework has also not been established for the industry, and the Netherlands has even toyed with the idea of an outright ban. 

The Netherlands is also a supporter of the EU’s Markets in Crypto Assets (MiCA). According to a Financial Times report, the law could potentially give the AFM more oversight powers over the digital currency market.

However, digital currencies still have support from several government officials. These include the Dutch Minister of Finance, Wopke Hoekstra, who has opined that the Netherlands would be better regulating the industry than placing an outright ban on it. 

“My observation is now that supervision is more effective than a total ban in the Netherlands,” he said last year. 

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