UK’s Financial Conduct Authority (FCA) will introduce new rules around crypto promotions aimed at safeguarding consumers.
The financial regulator proposal calls for explicit investor warnings and will come into effect on October 8.
The Mandate of Clear Warnings for Crypto Promotions
The FCA’s new regulations require cryptocurrency companies to disclose risks clearly in their ads. This includes warnings like “if something goes wrong” and “be prepared to lose all the money you invest.”
There is also a stipulation that firms must give investors a “cooling-off” period, according to the Guardian. The purpose of the cooling-off period is to give potential investors time to think over their choice. It aims to lessen the possibility of impulsive investments.
FCA notifications suggest that investors have a choice to invest in any asset class. However, it encourages customers to take the time to educate themselves about the risks involved before making an informed decision.
Furthermore, the new rules also prohibit bonuses for referring friends to crypto firms. With this step, incentives and promotions in the cryptocurrency market that can be deceptive would be eliminated.
According to Sheldon Mills, executive director of consumers and competition at the FCA, investors must be aware of the dangers of unregulated cryptocurrency investments. Mills emphasized that the FCA’s regulations give people the time and risk warnings they need to make informed choices.
If you want to learn more about changes in crypto regulations in the UK, read our article here:
In the past, the FCA also noted instances of misleading crypto promotions censured by the Advertising Standards Authority (ASA). For example, an advertisement by crypto exchange Luno received flak for ads on the London Underground and London bus networks.
Crypto.com was also dealing with legal difficulties from the U.K. ASA for misleading advertising during a sports partnership.
UK Gets Strict With Investor Protection
These new regulations also align with ASA’s crypto asset regulation put in place last year to counter deceptive crypto promotions. In addition, the country’s general direction has been to develop a specific framework to reduce investor losses.
The government said it would vigorously go after fraudsters no matter how hard they try to conceal. According to Prime Minister Rishi Sunak, they have a strong commitment to fighting fraud.
The UK government unveiled its measures earlier this month to combat crypto and insurance fraud, which costs the nation $9 billion annually. The authorities established several measures to combat this problem, including a prohibition on cold calling and hiring experts to develop preventative measures.
The tougher regulations coincide with the neighboring European Union’s upcoming adoption of the Market in Crypto-Assets (MiCA) legislation. The members recently accepted the framework as investor protection becomes paramount amid crypto popularity.
That said, further regulatory measures are anticipated for crypto firms in the UK in the coming days. In February, the Treasury published a consultation document outlining plans for phrased regulations while aligning crypto with traditional assets like stocks and bonds.
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