Under the new rules, companies promoting crypto products or services in Britain must, from October, give a clear warning that customers could lose money in “high risk” investments – Copyright AFP/File Justin TALLIS
Britain’s financial regulator on Thursday tightened rules around the promotion and sale of cryptocurrencies as it seeks to protect consumers.
The Financial Conduct Authority (FCA) has unveiled a package of measures for the industry, which has long faced criticism for a lack of oversight – and promises of high returns in a volatile market.
Under the new rules, companies promoting crypto products or services in Britain must from October “clearly warn” that customers could lose money in “high risk” investments.
Marketing firms should also offer a cooling off period to first-time crypto investors.
The watchdog will also ban “refer a friend” bonuses designed to incentivize cryptocurrency investment.
“Our rules give people time and the right risk warnings to make an informed decision,” said Sheldon Mills, FCA’s head of consumer and competition.
The announcement comes after Britain introduced legislation earlier this year to include cryptocurrency promotions within the scope of the Financial Conduct Authority (FCA).
British lawmakers are also calling for cryptocurrency investments to be regulated in Britain, just like the gambling industry in the country.
In response to the FCA’s announcement, Su Carpenter, COO of industry group CryptoUK, said the new rules could block new entrants.
“There is a risk that this solution will unfairly concentrate the market power of those already authorized firms and potentially encourage unauthorized firms to operate from outside the UK,” Carpenter said.
This could, in turn, create a “competitive disadvantage for UK-based organizations and may also undermine consumer guarantees,” it added in a statement.
The FCA’s crackdown follows moves toward tighter regulation in the United States.
The Securities and Exchange Commission on Tuesday filed a lawsuit against cryptocurrency exchange Coinbase, alleging that the largest cryptocurrency exchange in the United States has made billions of dollars by “facilitating the illegal purchase and sale of securities of crypto assets.”
This week, the SEC also unveiled charges against Binance peer Coinbase and its founder, Changpeng Zhao, for numerous alleged violations of securities law.
The news comes on the heels of the spectacular failure of cryptocurrency exchange giant FTX in November, which sparked anxiety about a market some pundits have dubbed the “Wild West”.
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