Under new restrictions enforced by the UK financial watchdog, crypto businesses must inform clients they shouldn’t expect protection if their investment goes wrong and implement a “cooling off” period for first-time investors.
According to the Financial Conduct Authority, businesses advertising cryptocurrency products or services will have to include a clear risk warning in their advertisements as of October 8.
According to the FCA, an illustration of this kind of a notification would be to inform clients that they shouldn’t count on protection “if something goes wrong” and that they should be “prepared to lose all the money you invest.” The FCA continued by advising customers to “take two minutes to learn more.”
Companies that promote crypto assets, including virtual currencies like bitcoin, will have to give new investors who ask to participate in their products a pause. Additionally, rewards for referring friends to a crypto company’s products will be outlawed.
Consumers need to be aware that the cryptocurrency market is still mainly unregulated, placing them at danger of losing all of their money because there is no safety net in place, according to Sheldon Mills, executive director of consumers and competition at the FCA.
The choice to purchase cryptocurrency is up to the individual. But studies reveal that a lot of people regret making a snap judgement. According to him, their regulations provide consumers enough time and accurate risk warnings to make an informed decision.
The significant risk and highly uncontrolled nature of cryptocurrency should still be known to consumers. Investors need to be aware that they could lose all of their capital.
According to studies cited by the FCA, the expected amount of cryptocurrency ownership in the UK more than doubled between 2021 and 2022. 10% of survey participants claimed to own cryptocurrency assets, according to an FCA-commissioned study.
The watchdog has also expressed concern over the surge in cryptocurrency scam reports, which have increased from 1,619 in 2019 to 6,372 in 2021.
The FCA claimed that the Advertising Standards Authority has already criticized certain bitcoin advertisements, including one by the cryptocurrency exchange Luno that was displayed on the London bus and Underground networks and stated: “If you see Bitcoin on the Underground, it’s time to buy.”
Additionally, the ASA determined in 2021 that a Facebook advertisement for a fan token produced by the Arsenal football team trivialized cryptocurrency trading.
The FCA claimed that the new regulations aligned cryptocurrency with a framework for false advertising involving high-risk assets that was put in place last year.
The UK is planning to regulate cryptocurrency businesses even further. Bringing cryptocurrency regulation in line with those of conventional assets like stocks and bonds was the focus of a consultation document published by the Treasury in February.
