The UK’s Financial Conduct Authority (FCA) recently proposed some strict new rules for how crypto companies can market their products and services to customers. If passed, the regulations would clamp down on misleading hype and unrealistic promises, requiring more transparency and balanced information.
According to a release by the FCA, the new rules, which will apply to first-time investors in the UK willing to purchase crypto assets, will require companies to introduce a cooling-off period from October 8, 2023. The FCA has also opened consultations regarding the matter until the 10th of August.
New Rules For Firms Promoting Crypto Products Or Services
Essentially, the FCA wants to treat cryptocurrencies as high-risk investments as part of its post-Brexit financial strategy revealed in February. In 2022 alone, the FCA forced firms to rectify 8,582 misleading promotions.
The regulator is concerned that crypto newbies don’t fully understand the risks of these volatile, unregulated assets. With the value of major cryptocurrencies fluctuating wildly, those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair, and not misleading.
According to the announcement, firms promoting crypto products or services will need to include a clear risk warning such as: ‘Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.’
A comprehensive set of guideline consultations will be published, and it will clarify the rules that companies must follow to make sure that advertisements regarding cryptocurrencies are not misleading. In addition, promotions that appear to attract crypto investors, such as ‘refer a friend’ programs, would no longer be allowed.
The total market cap drops to $1.067 trillion | Source: Crypto Total Market Cap on TradingView.com
US Treasury Secretary Yellen Wants More Regulation
Regulators from big powerful nations are continuing to look for legislation considering that there are no regulations in place to oversee the cryptocurrency industry. Despite this, there has been no significant development so far.
Recently, Janet Yellen, the current Secretary of the United States Treasury and a former Chair of the Federal Reserve has voiced her concern over the lack of regulation in the cryptocurrency market. She contends that the United States Congress should be doing more to pass laws that will protect investors and curb illicit activity.
During an interview on CNBC’s Squawk Box, Yellen stated, “I see some holes in the system where additional regulation would be appropriate.”
The era of unchecked crypto hype by companies may be coming to an end in the UK. While regulation could curb crypto crime and shield consumers, lawmakers need to be careful not to stifle innovation. The crypto market continues to grow rapidly, and many see digital assets as the future of finance.
Featured image from iStock, chart from TradingView.com