ESMA is concerned about CFD restriction compliance in the EU

The European Securities and Markets Authority (ESMA) has voiced concerns that financial service providers are not complying with the regulator’s restrictions installed on Contracts for Differences in the past.

The EU regulator had limited the marketing and promotion of CFD related products to EU customers by EU companies, but there seemed to be a small loophole in the law.

Third-country based companies would have the right to offer these products to EU-based customers, should the customers themselves show initiative of registering with the service providers.

This also concerns cryptocurrency CFDs as nearly every brokerage hinges on its promotion and trading volumes to remain in the positive revenue-wise.

According to ESMA, EU-based companies are opening subsidiaries in third-party countries outside of the Eurozone and enticing their European clients to switch over to their new platforms.

This is a clear violation of the regulation and ESMA has come out with a reminder that despite the existence of the loophole, it will double down on the restrictions in the future.

ESMA may take the route of the FCA, meaning that they can threaten to ban cryptocurrency CFDs, which would be of great benefit to the crypto community as most CFD traders would spill over to crypto exchanges.

The regulator hasn’t mentioned what the next steps will be but the monitoring process is going to resume, and the regulator is most likely going to compile a comprehensive list of all the violators.

From Zero to Web3 Pro: Your 90-Day Career Launch Plan