2:1 Restrictions May Be Placed on Cryptocurrency CFDs Thanks to New ESMA Measures


The European Markets and Securities Authority (ESMA) just announced that it would be imposing restrictions on the leverage provided for contracts-for-difference along with the binary options retail investors in Europe offer.

The European Markets and Securities Authority has agreed to a “temporary intervention measure for products on the provision of binary options and contracts-for-difference in the EU.

This new measure will place restrictions on the leverage on cryptocurrency CFDs to 2:1. From the agreement, traders will also be mandated to provide an initial margin of 50% of the value (notional value) of the CFD if the asset is a cryptocurrency that is more than two times the margin required of other CFD.

New Measures, New Rules

The ESMA has announced that the CFDs with underlying cryptocurrencies raise significant concerns.

The statement by the regulator is as follows:

“Cryptocurrencies fall in an immature asset class and pose major risks for investors.” The ESMA cited its concerns about the integrity of the processes of price formation in the underlying crypto market. This makes it hard for retail clients to value the products.

The ESMA continued:

“Specific characteristics of these cryptocurrencies as asset class products make close monitoring of the market for financial instruments that include cryptocurrencies important.”

The ESMA believes that stricter measures will be required.

The new measures will see restrictions of 30:1 placed on all major crypto pairs, 20:1 for pairs that’s aren’t major as well as major indices and gold, 10:1 for non-major equity indices and other commodities that aren’t gold, and 5:1 on other reference values and individual equities.

The ESMA intends to adopt these measures in the coming weeks and with the official languages of the European Union. More information will be disclosed then.


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