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BRITS will get better protection from investing in crypto assets like Bitcoin, as the FSA is cracking down on the sector.

Refer a friend bonuses will be banned under new rules from the Financial Conduct Authority (FCA), with policymakers warning investors they should be prepared to “lose all their money” in the high-risk market.

The watchdog is cracking down on advertising for cryptocurrency investmentsCredit: Alamy

Companies that market cryptocurrencies and other assets will also need to give a cooling off period to first-time investors from October 8, 2023.

And people will need to verify the appropriate level of knowledge and experience before investing money in Bitcoin, Ethereum, Dogecoin, and other crypto investments.

The FCA said clear risk warnings should be in place when companies promote cryptocurrencies under the new rules.

Investing in cryptocurrencies is volatile and highly risky.

However, one in 10 adults in the UK now owns cryptocurrency, with ownership doubling between 2021 and 2022.

Many have lamented the “hasty” decisions made on these investments, according to the Financial Conduct Authority (FCA).

Investors have previously revealed how they lost millions of pounds in cryptocurrency, while others said losses of millions of pounds ruined their lives.

Britons were also scammed out of £329m by crypto scams in 2022, according to data from Action Fraud.

FTX, once one of the largest cryptocurrency exchanges in the world, collapsed into bankruptcy in November with its founder accused of fraud in the United States.

Experts said they now expect more rules to follow for the crypto sector.

“This is potentially the thin end of the wedge of cryptocurrency regulation, as financial watchdogs around the world seek to protect consumers from fraud, sharp selling tactics and misinformation,” said Laith Khalaf, head of investment analysis at AJ Bell.

Just this week, the SEC indicted Binance for a number of crimes, and the cryptocurrency world continues to reel in the wake of the FTX scandal.

“The cryptocurrency market is often compared to the Wild West, but now the mayor is coming to town to clean things up.”

Myron Jobson, senior personal finance analyst at Interactive Investor, added that the cryptocurrency markets are a “cauldron of volatility, subject to extreme volatility and sudden reversals.”

He said, “Investors need a thorough understanding of the volatility, technological complexities and market uncertainties inherent in cryptocurrency bets.

“Failure to provide accurate and balanced information creates a distorted reality, leading unsuspecting individuals down a dangerous path of financial harm.”

The FCA rules follow government legislation to bring crypto promotions into the jurisdiction of the regulator.

Additional guidance outlining the expectations of companies advertising crypto to UK consumers could be provided as the Financial Conduct Authority (FCA) consults on potential changes.

“It is up to people to decide whether to buy cryptocurrency,” said Sheldon Mills, executive director of consumer and competition at the FCA.

“But research shows a lot of regret for making a hasty decision. Our rules give people time and valid risk warnings to make an informed decision.

Consumers should still be aware that crypto is still highly unregulated and high risk.

Those who invest should be prepared to lose all their money.

The cryptocurrency industry needs to prepare now for this major change. We are working on additional guidance to help them meet our expectations.”

What are the risks of investing in cryptocurrencies?

Many people have bought cryptocurrencies and decentralized finance tokens in hopes of making a quick return.

Investing is not a foolproof way to make money – you can lose everything.

Moreover, crypto assets are especially risky because the markets are very volatile.

Investors need to understand these risks before parting with their money.

Some cryptocurrency products and services are too complex to understand with scams rampant in the market.

As a general rule, you should only invest in things that you understand.

In some cases, there is no guarantee that you can convert crypto assets into cash – it may depend on current market demand and supply.

Fees and costs may also be higher than regulated investment products.

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