8th June 2023 – (London) The U.K.’s financial regulator, the Financial Conduct Authority (FCA), has announced new rules for marketing cryptoassets to UK consumers. The FCA’s move follows the US Securities and Exchange Commission’s decision to increase its oversight of crypto. The new advertising rules will require those marketing crypto to introduce a cooling-off period for first-time investors from 8th October 2023. The regulator has also banned “refer a friend” bonuses as part of a package of measures designed to ensure that those who buy crypto understand the risks involved.
The FCA’s new rules follow research that shows estimated crypto ownership has more than doubled from 2021 to 2022. The regulator’s measures will mean that crypto firms must ensure that their customers have the appropriate knowledge and experience to invest in crypto. Those promoting crypto must also put in place clear risk warnings and ensure that adverts are clear, fair and not misleading.
Senior personal finance analyst at Interactive Investor, Myron Jobson, commented on the new rules, saying that “how crypto firms will be able to prove that their customer base has the appropriate level of knowledge is anyone’s guess.” He added that the challenge for the regulator is to devise a robust customer knowledge framework so that all the players involved know what good looks like.
The FCA’s rules follow government legislation to bring crypto promotions into the regulator’s remit. Sheldon Mills, the FCA’s Executive Director of Consumers and Competition, said that “it is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.”
In May, the U.K. Treasury Committee called for consumer trading in unbacked crypto to be regulated as gambling.
Meanwhile, the U.S. Securities and Exchange Commission has taken a more serious approach to regulating crypto firms. The SEC has sued both Binance and Coinbase, two of the largest exchanges operating in the country. Coinbase is listed and technically regulated, while Binance operates out of the US through an entity called Binance.US.
The lawsuit against Binance alleges that the exchange carried out illegal operations in the US and mishandled customer funds. The lawsuit against Coinbase alleges that tokens such as SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO are securities.
The two lawsuits indicate a more broad brush approach to regulating the industry as a whole. Crypto has been in regulators’ crosshairs since the spectacular crash of crypto exchange FTX.