Earlier today, the UK Financial Conduct Authority (FCA) officially announced that it is to oversee the demonized binary options, coming into effect from 3rd January 2018. The move came as part of a crackdown on binary options, which duped investors with almost £60 million over the span of five years. Last month, the City of London police raided 20 business units that offer binary options services. The action took place as part of a massive clampdown on investment scams involving binary options trading.
Binary options offer a number of trading opportunity choices, ranging from bets on the currency movements to fluctuations of prices over different periods of time, the short of which could be from 30 seconds up to 5 minutes. Binary options gained extreme popularity in the recent years. Unfortunately, the provision of binary options services remained unregulated in many countries for long enough. This stimulated the criminals to benefit from the situation and the result is as expected – millions had been lost in frauds involving binary options.
According to information provided by the UK police, £18 million has gone down the drain over the first half of this year. This was a sure sign that the problem is growing at a rapid pace and tough measures are needed to weed it out. Consequently, the government launched the biggest ever crackdown on binary options across the UK.
FCA Warns Investors about Hidden Threats
Currently, binary options are monitored by the UK’s Gambling Commission, but the things will change drastically from January next year, when FCA is to take the reins. Today, FCA issued the so-called “Consumer warning about the risks of investing in binary options”, which provides a detailed information regarding the frauds involving binary options.
According to the body, the wrongdoers are successfully targeting people via advertisements, which pop up on the main page of websites. The commercials feature misleading information, trying to lure people with fake promises about higher returns. However, these bets are never placed and the wrongdoers use various software programs to manipulate prices and payouts. These brokers usually disappear whenever investors want to withdraw money from their accounts.
FCA also warned people about the potential risks, which contracts for differences (CFDs) with cryptocurrencies may hide. Cryptocurrency CFDs allow investors to speculate on a change in the price of a virtual currency. The authority pointed out that the cryptocurrencies are rather volatile at this point and the risks of financial losses are higher. Under the existing regulatory framework, cryptocurrency CFDs are monitored by FCA.
From the beginning of the next year, the victims of such financial frauds will be able to look for a compensation at the Financial Services Compensation Scheme. At present, plenty of countries proposed or even approved prohibition of the provision of the highly controversial binary options services.