Bitrabo Editorial
The Financial Conduct Authority (FCA), the regulatory body in the UK, has imposed new, tougher rules to protect consumers against possible losses when investing in crypto assets and companies dealing with them. The FCA has developed a set of new marketing rules for crypto-related companies that are patterned after the regulations that it applies to known high-risk investments in traditional finance.
What the UK Regulator Wants: Clear Risk Warnings and ‘Cool Off’ Period
The FCA considers cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and Litecoin as high-risk, restricted mass market investments. In this regard, the regulator now requires crypto firms to provide detailed risk warnings on their promotional campaigns, such as advertisements. It also bans the “refer a friend” scheme, in which owners or users of crypto assets get rewards by recruiting people to buy digital currencies using a particular platform. Additionally, the FCA wants to impose a 24-hour “cool off” period for first-time crypto investors. This means that new customers will have to wait for at least a full day after successful registration of a valid trading account before being allowed to make any kind of purchase.
According to Sheldon Mills, the executive director of the FCA’s Consumers and Competition Division, which oversees 50,000 firms in the UK, consumers should be aware that crypto remains largely unregulated and high-risk. The new rules will take effect on October 8, 2023.
Resistance from Crypto Firms
CryptoUK, a trade association in the UK for the crypto industry that practices self-regulation, hopes to review findings that prove the 24-hour “cool off” period is necessary. The organization also desires that pertinent regulations enable consumers to confidently transact and invest in crypto assets as they have other use cases aside from being just investments.
Featured image from Financial Times