Nearly three weeks ago, the Financial Conduct Authority in the United Kingdom announced that they’re considering to place a permanent ban on trading Contracts for Difference for cryptocurrencies.

The market didn’t experience too much of an uproar, as the trading tools have lost their touch after multiple exchanges introduced leveraged trades with actual cryptos.

However, instead of an uproar, there was a mass disappointment as thousands of traders were expecting the UK to delve outside of ESMA restrictions and prove to be an amazing “local” alternative.

But it seems that ESMA still remains as the dominant force in the region when it comes to regulating the financial markets, leaving most European traders to abandon crypto CFDs entirely.

However, as already mentioned in the beginning the tools have already lost their popularity due to rising competition from prominent exchanges, but they still remain as “go-to” assets for those who trade on off-shore platforms.

Russia could enter the scene

Even though Russia was also considering to place a ban on CFDs in 2017 it still remains as a great alternative destination for all CFD broker refugees in Europe. CySEC tried to somehow get a slice of the cake after ESMA restrictions finally met their deadline, but it still remains within “moderate” proportions.

Currently, cryptocurrencies have a 2:1 leverage cap in all of the EU region, but Russia does not have those kinds of restrictions.

Offshore companies for Europeans are quickly becoming the only alternative for high-risk/high-reward crypto trading while not having to deal with the blockchain itself.

However, many think that the Russian financial market won’t even bother with crypto CFDs as there are much more pressing matters in the country, such as oil prices and the declining ruble. But several Russian financial experts suggest that introducing high-leverage crypto CFDs to the economy could potentially bolster the economy by allowing funds to be funneled outside of the country.

One important detail to pay attention to here though is the recent decision from the Russian Central Bank, which revoked licenses from multiple foreign Forex brokerages operating in the region.

Therefore, only local companies would get the opportunity to offer high leverage on CFDs, ultimately retaining all the funds within the country’s borders.

Why was the UK a beacon of hope?

It’s no secret that the Brexit deadline is quickly approaching and we’ve yet to see a decision on a deal between the UK and the EU. At this point, almost everybody is anticipating a no-deal Brexit, which could potentially plunge the UK economy into chaos.

It was expected that the UK would at least discard ESMA restrictions to entice several financial companies to remain on the Island, but it seems that their concern for consumer purchasing power is much more important.

The FCA has, in fact, said that it will save the traders as much as 230 million pounds every year, allowing them to diversify these funds into various remaining industries in the country.

Regardless of how we look at it, the FCA may have started a trend where getting rid of risky CFDs could prove much more beneficial to the economy than allowing the small percentage of traders to profit from it.

As for the CFD brokerages, they’ll need to somehow adapt to the new reality. It’ likely that if the ban is approved nearly all major CFD brokerages in the UK will take a massive hit as crypto CFD trades are sometimes responsible for a large majority of the revenue. This can be seen with Plus500’s decline in recent quarters and a sudden uptick in 2019 due to a revived crypto market.