FCA to require ‘risk warnings’ on crypto as UK tightens regulation

2023-6-8 13:30

The U.K.’s Financial Conduct Authority (FCA) announced that from October 1, crypto would be classified as “restricted mass market investments,” a category reserved for higher-risk investment products.

Under the new designation, advertisers and crypto firms face a raft of requirements, including promotional material to contain “clear risk warnings,” bans on incentives such as referrals and new joiner bonuses, and the implementation of a 24-hour cooling-off period.

FCA examples of risk warnings include notification not to expect protection if something goes wrong and “[be] prepared to lose all the money you invest.”

The FCA’s Executive Director of Consumers and Competition, Sheldon Mills, told The Guardian that investors must understand that cryptocurrency is a largely unregulated industry, meaning there is no safety net when things go wrong. He added:

“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.”

Figures from the FCA showed that estimates on U.K. crypto ownership more than doubled between 2021 and 2022, with 10% of survey respondents reporting owning cryptocurrency.

However, crypto crime is also on the up. The FCA reported that 1,619 scam instances occurred in 2019, climbing to 6,372 in 2021 – representing a nearly 300% increase in cases.

U.K. crypto regulation coming

The Financial Services and Markets Bill is nearing the final stages of passing into law. It represents a significant shakeup of financial law, giving the FCA and Prudential Regulation Authority (PRA) greater authority to govern the financial sector, including the crypto industry.

A key component of the Bill is the inclusion of crypto within the U.K.’s regulatory framework. Although it appears the FCA is taking a cautious approach to digital assets, Rohit Bhosale, Digital Bank Specialist at Persistent Systems, said the Bill was “a great step forward.” He added:

“With this development, I can see more and more people venturing into the crypto space.”

Breaching the FCA’s “restricted mass market investments” rules could result in a two-year prison sentence and a fine.

The post FCA to require ‘risk warnings’ on crypto as UK tightens regulation appeared first on CryptoSlate.

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