UK FCA announces new rules for marketing of crypto assets 

Firms will have to give a mandatory cooling-off period for first-time investors.

UK.- The Financial Conduct Authority (FCA) has announced strict new rules for the marketing of crypto assets in the UK. From October 8, firms must give first-time investors a mandatory 24-hour cooling-off period, during which they may reconsider their investment.

Other new restrictions include a ban on “refer-a-friend” promotions, while crypto firms will also be required to ensure that investors have sufficient knowledge and experience to invest in crypto while being aware of the risk. Clear risk warnings must be displayed and promotional material must be clear, fair and not misleading.

The FCA said firms should “modify prescribed risk summaries to avoid misleading or irrelevant information.”

The rules were drawn up after FCA research estimated that crypto ownership in the UK had more than doubled in one year from 2021 to 2022. They must be followed by all firms providing crypto assets to UK consumers, including overseas firms.

The new rules follow the government’s consultation on the “Future Regulatory Regime for Cryptoassets” and aim to ensure that investors “are informed and aware of the risks associated with their investments”.

Sheldon Mills, executive director, consumers and competition, said: “The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.

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

Is crypto investment gambling?

The announcement of the new rules comes just two weeks after the UK’s House of Commons Treasury Committee recommended that retail investment in cryptocurrencies be treated as gambling. In its report on the “benefits of crypto assets and their underlying technology value, and the risk of investment in crypto assets”, it criticises government plans to regulate cryptocurrencies as financial services.

The report warns that such a move could create a false impression of security for investments that can have very high price volatility. It concludes that due to the risk of consumers losing their entire investment, cryptocurrency investment should be regulated as a form of gambling.

The trade group CryptoUK has recommended that the government recognise crypto-assets as a new investment class rather than as a form of financial investment or a form of gambling. It also expressed doubts about the FCA’s new restrictions. 

Director of operations Su Carpenter said: “The regulations could become overly restrictive, given the limited organisations meeting the criteria for approving financial promotions.”

She added: “The solution could unfairly concentrate market power, possibly encouraging unauthorised firms to operate outside the UK.”