The Difference Between a Ban and a Restriction

Reporting on regulatory measures in this sector uses one word for several distinct things.

The gradations

A ban on institutions providing services. Banks may not service crypto firms. Individuals are not prohibited from holding anything; the effect is on access.

A ban on marketing. Firms may not advertise to retail customers in that market. Products remain legal to hold.

A restriction on specific products. Leveraged derivatives to retail customers, for example. Spot trading unaffected.

A ban on unauthorised firms operating. Which is not a ban on the activity but a requirement to be licensed for it.

A ban on holding or using. Prohibiting individuals from owning the asset. Rare, and this is what the word usually implies to readers.

Most measures reported as bans fall into the first four categories.

Why the distinction matters

The market impact differs enormously. A restriction on retail leverage affects a narrow product. A prohibition on individual ownership affects everything.

Coverage that does not distinguish produces reactions calibrated to the most severe reading of a measure that is usually far narrower.

How to tell which one

Read the measure. Regulators publish them, and the operative section states who is prohibited from doing what.

Two questions resolve it. Who is bound: firms or individuals? What is prohibited: an activity, a product, a marketing practice, or ownership?

Enforcement reality

A prohibition on firms is enforceable, because firms have banking relationships, offices and named directors.

A prohibition on individuals holding an asset is considerably harder to enforce and, where it has been attempted, has produced activity moving to channels outside supervision rather than ceasing.

That practical difference is part of why the first category is far more common than the fifth.

What reaches users

Loss of access to regulated venues in that market, which is the effect of restricting firms.

Where a market restricts firms, users lose the ability to transact through supervised platforms. Those who continue do so through unsupervised ones, which is generally worse for them.

The check

For any measure affecting a market you are in, read the regulator’s own publication and identify who is bound and what is prohibited.

And check whether the venue you use is affected, which is stated in its own notices. Platforms serving a market under a framework, such as exchanges licensed in the jurisdiction, notify customers directly when a measure changes what they can offer.