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Online payments platform PayPal is changing its crypto offerings in the U.K. to comply with new financial regulations.
Starting October 1, PayPal will temporarily pause the crypto buying service in the U.K. According to crypto media outlet Cointelegraph, the service will return in early 2024.
“We’re taking this measure in response to new rules enacted by the U.K. Financial Conduct Authority (FCA) that require crypto firms to implement additional steps before customers can purchase crypto,” wrote Paypal to its U.K. customers on Tuesday. “While we work to satisfy these new regulations, you won’t be able to buy crypto using PayPal.”
Although the service is paused, customers can keep their previously purchased tokens on the platform free of charge. They can also sell them at any time as desired.
PayPal first offered cryptocurrency services in the U.S. in late 2020. A year later, Paypal launched its crypto trading service in the U.K. Cryptocurrencies available on the platform include Bitcoin, Bitcoin Cash, Ethereum, Litecoin and the new PayPal stablecoin.
Since then, it has expanded its crypto services. Besides launching the PayPal PayPal USD (PYUSD) stablecoin earlier this month, the fintech platform introduced a new crypto hub feature on its interface.
PayPal is temporarily pausing its crypto buying services to adjust to the new rules enacted by the U.K. Financial Conduct Authority (FCA) that will take effect from October 8, 2023.
Paypal and other crypto firms must implement more steps before the U.K. regulator gives them the green light to sell crypto to domestic customers. Companies must provide clear warnings about the risks of investing in crypto and refrain from making misleading or deceptive statements.
The FCA has also banned crypto firms from using “refer a friend” bonuses to attract customers. The FCA said these bonuses could mislead consumers into thinking crypto is a low-risk investment.
According to the new regulations, crypto firms operating in the U.K. can only promote digital assets in certain ways. They must receive authorization from regulators to do digital asset promotions. If not, crypto firms can work with entities registered with the FCA to do the promotions. Another option is to have promotions that qualify as exempts under the country’s Financial Services and Markets Act.
These new regulations encompass website promotions, mobile apps, social media and online advertising. Failure to comply could result in criminal charges.
“We will take robust action against persons illegally promoting to U.K. consumers,” said the FCA in a notice. “This may include, but is not limited to, placing firms on our warning list requesting take downs of websites, social media accounts, apps and all other promotions that are in breach, and enforcement action.”
The regulations were announced after an FCA research revealed that crypto ownership in the U.K. had more than doubled from 2021 to 2022. In response to this growth, the FCA has taken steps to ensure that consumers are adequately informed about the risks of investing in cryptocurrencies.
Along with these new regulations, the U.K. government is preparing the “Travel Rule” — developed by the Financial Action Task Force (FATF) — that will come into effect next month. It comprises Know-Your-Customer and Anti-Money Laundering rules.
The Travel Rule requires crypto firms registered with the FCA to share information about the originator and beneficiary of cryptocurrency transactions, similar to how they do for traditional fiat currency transactions.
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