The Cypriot financial regulator CySec is tightening the rules for trading CFDs on cryptocurrencies. Among other things, brokers will only be allowed to offer leverage of 1: 5 in the future and passporting rights will also be limited. In addition, brokers will only be able to generate 15 percent of their quarterly total sales in the future from sales from trading in cryptocurrencies. These announcements by CySec come at a time when the volatility of cryptocurrencies, especially Bitcoin, has risen sharply. The value of a bitcoin recently rose from around $ 1,000 in January to more than $ 6,000 for the first time.
No uniform legal framework
So far there is no uniform legal framework valid across Europe for trading cryptocurrencies. As a result, CySec is now becoming active itself and is establishing stricter rules for trading cryptocurrencies. In the future, similar requirements will apply to brokers who offer trading in CFDs on Bitcoins, Etherum, Litecoin or other digital currencies as for other financial products. In addition, , CySec emphasized the risks associated with cryptocurrencies in a further communication.
Regulations for CFD trading in cryptocurrencies
In its communications, CySec Rules for CFD trading in cryptocurrencies. For example, brokers now have to provide specific information about the special features of this asset class and point out that there is currently no uniform, EU-wide regulatory framework for CFD trading in cryptocurrencies. Brokers also have to emphasize the higher risks, especially the high volatility. CySec sees the particular volatility of cryptocurrencies as a possible cause of high losses. In addition, brokers must make it clear that investors have so far not been compensated for losses from compensation funds.
Further requirements for regulated brokers
In future, brokers regulated by CySec will have to meet numerous requirements from the regulatory authority when trading with Meet cryptocurrencies. Not only do they have to monitor the risks involved in dealing with cryptocurrencies, they also have to exercise greater care when selecting partner companies. Exchanges or financial service providers with whom the broker works must comply with the legal requirements in the country in which they are based. Among other things, brokers must ensure the exact pricing of assets and the best possible execution by comparing tariffs. The brokers themselves should clearly explain how they calculate their bid and ask prices.
Restrictions on passporting rights
According to CySec , cryptocurrencies are not covered the MiFID directive because there is no Europe-wide legal framework for it. This also removes the passporting rights for brokers for countries outside the EU. In future, you must therefore be aware of and observe the laws in the country in which you operate.
Cryptocurrencies always in the spotlight
Worldwide, cryptocurrencies are currently the focus of attention again and again, For example, the Chinese central bank declared so-called ICOs, a type of financing round for digital currencies, illegal in September. Again and again there are discussions and suggestions regarding stronger control and regulation of cryptocurrencies. The UK financial regulator recently warned private investors in particular that high volatility could result in high losses when trading cryptocurrencies. BaFin, which tightened the rules for CFDs this year and banned the sale of CFDs with a margin requirement to retail investors, has not yet commented.
Risks in CFD trading in cryptocurrencies
Cryptocurrencies are becoming increasingly popular with traders. The high volatility brings with it the prospect of high returns. Since falling and rising prices can be used in CFD trading, this financial instrument is very attractive for cryptocurrencies and more and more brokers are offering this option. Nevertheless, CFDs are a highly speculative financial instrument that investors should be aware of the risks of. The leverage, which is made possible by many brokers, enables to achieve high profits with a comparatively little effort. On the other hand, this also increases the risk of suffering large losses.
Long cryptocurrencies at AvaTrade
AvaTrade is one of the pioneers in online trading with cryptocurrencies. The broker offered private investors trading Bitcoin and Litecoin early on. Etherum and Ripple were added later. Bitcoin Cash, which was created in the summer after a hard fork, i.e. a split off of Bitcoin, is also in the range. The cryptocurrencies can be traded around the clock at attractive spreads and with levers of up to 20: 1. There are no other transaction fees.
Bet on price movements
At AvaTrade, traders only bet on price changes. You don't have to buy the currency directly. Long or short positions can be opened. This takes full advantage of the volatility of cryptocurrencies as traders benefit from rising and falling prices. Trading can start with a $ 100 stake and is done through one of AvaTrade's trading platforms such as MetaTrader 4 or AvaTrader GO. Here traders can also use live courses and charts. Customer service is available for questions and answers.
Traders from all over the world
AvaTrade was founded in 2006 and is considered one of the pioneers in online trading. AvaTrade was always delighted to receive awards as a test winner. Private investors were also able to trade CFDs on stocks, commodities and indices at an early stage. Today, according to the company, 200,000 traders are active at AvaTrade, who can access more than 200 trading instruments. AvaTrade has made a name for itself internationally, especially as a Forex CFD broker. Today the broker is registered in numerous countries and is also fully regulated there.
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Test offer with demo account
New customers can not only benefit from a bonus, but also for 21 days Test the broker's demo account. Then you have the choice between several account models with different margins. In addition, traders at AvaTrade have access to several trading platforms and a wide range of training courses from Viedeos to e-books. Daily market analyzes complete the offer.
CySec is tightening the rules for trading CFDs on cryptocurrencies. Among other things, brokers must present the risks in trading cryptocurrencies transparently. In addition, the maximum leverage is limited to 1: 5. So far, there is no Europe-wide regulation for dealing with cryptocurrencies, which are also becoming increasingly popular with trades. Many brokers now offer cryptocurrency trading. AvaTrade was one of the pioneers here.