The Financial Conduct Authority (FCA) has announced new advertising rules aimed at ensuring consumer protection in the crypto industry. Effective from 8 October 2023, marketers of cryptoassets targeting UK consumers will be required to introduce a cooling-off period for first-time investors. These measures are part of a comprehensive package designed to enhance understanding of the risks associated with cryptocurrency investments.
In addition to the cooling-off period, the FCA has banned “refer a friend” bonuses as part of its efforts to promote responsible marketing practices. The rules mandate that crypto firms must verify that individuals possess the necessary knowledge and experience to engage in crypto investments. Furthermore, promoters of cryptoassets must provide transparent risk warnings in their advertisements, ensuring clarity, fairness and the absence of any misleading information.
The FCA’s regulations align with government legislation, bringing crypto promotions under the regulatory purview of the authority. Sheldon Mills, Executive Director of Consumers and Competition at the FCA, emphasised the importance of informed decision-making and risk awareness. While acknowledging the individual’s right to choose whether to invest in crypto, Mills highlighted the regret that many experience due to hasty decisions. The FCA’s rules aim to provide individuals with the necessary time and risk warnings to make informed choices. Consumers should remain aware of the fact that crypto remains largely unregulated and highly risky and investors must be prepared for the possibility of losing their entire investment.
To facilitate a smooth transition and assist industry players in meeting regulatory expectations, the FCA is actively developing additional guidance. This guidance will offer comprehensive support to the crypto industry in adapting to these significant changes.
The FCA’s decision to introduce stricter rules is backed by recent research revealing a significant surge in crypto ownership. The estimated number of crypto owners has more than doubled from 2021 to 2022, with 10% of the 2,000 surveyed individuals confirming their ownership of cryptocurrencies.
This approach to crypto promotion is consistent with the FCA’s previous rules aimed at combating misleading advertisements for high-risk financial investments. Moreover, it aligns with the FCA’s 2023/24 business plan, which centres around reducing harm, establishing higher standards and fostering competition and positive change.
The FCA is actively seeking public input by inviting feedback on additional guidance for firms advertising crypto to UK consumers. Anyone interested in contributing to the consultation have until 10 August to provide their view.
These new rules are a significant step forward in ensuring the protection of consumers in the crypto market.
