The UK Financial Conduct Authority stated in a policy document published on Monday that investment in crypto assets should be limited, with consumers cautioned that they could lose all of their money.
Offering referral bonuses to clients will be prohibited, according to the financial-services regulator, as it prepares for new laws that will broaden its authority to include digital assets such as cryptocurrencies.
In April, then-Finance Minister Rishi Sunak stated that he needed the country to become a crypto asset hub. However, the recent market crash, which saw the price of bitcoin (BTC) fall and the collapse of assets like the terraUSD (UST) algorithmic stablecoin and hedge fund Three Arrows Capital, has made the regulator even more determined to act against what it considers to be excessively risky behavior.
We need people to be able to invest with confidence, comprehend the associated risks and get the investments that are appropriate for them which display their inclination for risk, stated Sarah Pritchard, the FCA’s executive director of markets.
Where we witness products being marketed without having the right risk warnings or are ambiguous, unfair, or misleading, we will act, she stated subsequent to a consultation published in January.
Despite its current lack of direct market regulation powers, the FCA stated that: We still consider crypto assets, when used as an experimental investment, to be high risk.
According to the plans, potential crypto buyers must be given a precise and more prominent warning that all of their money could be lost and will not be safeguarded if something goes wrong. While the new rules, in theory, only apply to risky non-crypto products, the FCA is anticipating for lawmakers to pass legislation that would extend them to innovative digital assets.
The regulator has tentatively stated that cryptocurrency will be classified as a “restricted mass-market investment.” Marketing to retail investors would not be prohibited, but there would be more restrictions than for assets deemed safer, like listed stocks.
Qualifying crypto assets are only likely to be apt for consumers as a small part of a diversified portfolio, according to the document, and should only be accessed when consumers comprehend the risks associated. Exposure should be limited to 10% of net assets.
Sunak resigned in July and is now competing with Foreign Secretary Liz Truss for the job of Prime Minister.