The U.K. Financial Conduct Authority, or FCA, has announced a significant overhaul of regulations governing crypto assets offered to consumers in the country.
Starting October 8 this year, platforms marketing cryptocurrencies like Bitcoin and Dogecoin to U.K. consumers will be required to implement a mandatory 24-hour cooling-off period.
Additionally, “refer a friend” practices will be prohibited, and platforms selling crypto assets must ensure that customers possess the necessary knowledge and experience to invest in cryptocurrencies.
Sheldon Mills, the FCA’s executive director of consumers and competition, asserted that while the decision to invest in crypto remains with individuals, many have regretted their hasty choices.
The new rules aim to give consumers sufficient time and appropriate risk warnings to make informed decisions. Mills cautioned that crypto investments still pose significant risks as the industry remains largely unregulated, and investors should be prepared to face the possibility of losing all their money.
“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations,” said Mills.
The regulatory reforms extend beyond the requirement for a cooling-off period and address the advertising practices of crypto companies. Firms promoting cryptocurrencies will be obligated to include clear risk warnings in their advertisements and ensure transparency, fairness and the absence of misleading information.
The FCA also plans to introduce future risk warnings, 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 two mins to learn more.”
These new rules follow recent government legislation bringing crypto promotions under the purview of the FCA. The regulation shift comes following a significant increase in crypto ownership in the country. An FCA survey recently revealed that crypto ownership among U.K. individuals more than doubled from 2021 to 2022, with 10 percent of the 2,000 respondents reporting owning cryptocurrencies.
The crypto industry and other interested parties now have until August 10 to provide feedback to the FCA before the new rules are finalized. The regulatory body is also seeking additional guidance to regulate crypto advertising to U.K. consumers.
Previously, the U.K. Advertising Standards Agency had banned several crypto firms’ promotions due to their misleading and irresponsible nature.
Commenting on the FCA’s actions, Susannah Streeter, head of money and markets at Hargreaves Lansdown, acknowledged the FCA’s proactive approach to safeguard consumers in the “crypto Wild West.”
“Relentless warnings about the dangers of pouring money into high-risk investments are clearly not working, and with crypto turning mainstream, the regulator is flexing its newly-found muscles to help police the space,” said Streeter, as quoted by FTAdviser.
Some U.K. Members of Parliament reportedly believe the proposed new rules fall short of expectations, however. Streeter noted that these regulations might not satisfy MPs who called for crypto to be regulated similarly to gambling, with stricter affordability triggers to reduce addiction.
Meanwhile, major crypto exchanges faced legal action in the U.S. Just yesterday, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase, alleging that the exchange operated as a middleman on crypto transactions while evading investor protection disclosure requirements.
Similarly, the SEC targeted Binance, the largest global crypto exchange, and accused its CEO of engaging in deceptive practices. These lawsuits mark a significant step in the SEC’s campaign to assert jurisdiction over the crypto industry, potentially transforming the market.
Legal experts suggest that the outcome of these cases could reshape the cryptocurrency industry, as the SEC has not previously challenged such prominent players.
If successful, the SEC’s actions would subject tokens to securities regulations, contradicting the industry’s argument that tokens are not securities and should not be regulated as such. Coinbase experienced a substantial net customer outflow of $1.28 billion following the lawsuit, according to initial estimates.
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