The Financial Conduct Authority (FCA) in the UK has come up with new rules to guide crypto advertising in the country. The new rules place certain restrictions on crypto adverts targeting UK residents.
Advertisers are also required to include a “cooling off period” for investors entering the crypto space for the first time.
Adverts must also included clear warnings on the dangers of investing in crypto, and must be “clear, fair and not misleading”, the guidelines state. Speaking on the new rules, executive director, consumers and competition at the FCA, Sheldon Mills said:
“It is up to people to decide whether they buy crypto, but research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.
“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money,” he added.
The new rules which will be effective from 10 October, will also ban ‘Refer a friend’ bonus offers. Mills however assures that the FCA is working to introduce guidelines that will make it easier for the crypto industry to cope with the new rules.
“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”
Growing Crypto Ownership Raises Concern
The number of crypto owners in the UK has grown significantly, doubling between 2021 and 2022. Many of the crypto owners however are not aware of the risks involved in holding such assets. Financial planning expert at Quilter, Rio Stedford said the new rules are necessary to protect those who are unaware of the risks but still hold crypto assets.
He added that despite making some money from crypto, investors are taking huge risks, especially those new to the system who are being lured by the older investors.
Myron Jobson, senior personal finance analyst at Interactive Investor also chimed in. “Cryptocurrency advertising often paints a vibrant picture, focusing on the allure of potential riches while conveniently sidestepping the intricacies and risks that underpin the crypto market,” he said.
“Without a firm grip on the reins, advertising in the crypto realm has become a wild west of dubious claims and misleading information. Unscrupulous actors have exploited the regulatory vacuum to peddle false promises and entice unsuspected victims into unwise and sometimes outright scam investments,” he added.
FCA and Crypto Regulation
The FCA has been quite friendly towards the crypto industry. However, the recent crackdown on crypto companies like Binance and Coinbase may have triggered the fresh concerns around crypto as expressed by the agency.
Last month, it announced its intention to work with crypto companies to bring up a crypto regulatory framework for the country. This is an important step in ensuring that while the industry’s growth isn’t stifled, investors are also protected to bring about a win-win scenario.
So far, the UK is among the most crypto-friendly, with the current prime minister being a strong supporter of the industry. The concerns being raised are genuine and can be traced back to the stringent crackdown on crypto in the US.
Clearly, the UK is on its way to becoming a crypto hub, but it is determined to ensure that investors understand what they’re getting into with crypto investing, which is what any responsible government would do.
