FCA cracks down on crypto hype

As regulators around the world struggle to come to grips with the crypto asset market, the U.K.’s Financial Conduct Authority (FCA) is adopting new rules designed to enhance investor protection by toughening curbs on crypto marketing.

Starting on Oct. 8, new rules will take effect that introduce, among other things, a mandatory cooling off period for rookie crypto investors. It will also ban referral bonuses and aims to enhance investor disclosure.

“The new rules mean crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto. Those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair and not misleading,” the regulator said in a release announcing the new measures.

The new requirements follow legislation that brings crypto promotions under the FCA’s jurisdiction, and aligns with its broader efforts to combat misleading advertising for high-risk investments.

“It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice,” said Sheldon Mills, executive director, consumers and competition with the FCA.

“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money,” he said.

Despite these risks, the FCA also estimated that crypto ownership has more than doubled since 2021. And, it noted that 10% of the investors it surveyed reported that they own crypto.

Ahead of the new rules, the FCA also published draft guidance on complying with the new crypto marketing requirements, which it aims to finalize by the fall.

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations,” Mills said.

The proposed guidance is out for comment until August 10.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.