Crypto services in the U.K. will face stricter regulations, including a “cooling-off period” for first-time investors and a ban on “refer a friend” bonuses.
In a June 8 announcement, the United Kingdom’s Financial Conduct Authority (FCA) said that advertisers of crypto services in the U.K. would be subjected to stricter regulations from Oct. 8, 2023.
The watchdog has mandated that crypto companies in the U.K. implement a “cooling-off period” for first-time investors. Additionally, as part of measures to enhance investor awareness of risks, the FCA has prohibited using “refer a friend” bonuses by firms in the sector.
Sheldon Mills, executive director of consumers and competition at the FCA, said in the written statement that while the decision to purchase crypto lies with individuals, research indicates that many express regret over impulsive choices. The rules aim to give people sufficient time and appropriate risk warnings to enable an informed decision-making process.
In the statement, Mills added:
“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”
Under the new regulations, crypto companies are obligated to verify that individuals possess the necessary knowledge and experience to engage in crypto investments. Furthermore, those promoting cryptocurrencies must provide transparent risk warnings and ensure their advertisements are fair, clear and devoid of any misleading information.
The nerules from the FCA align with government legislation aimed at subjecting crypto promotions to regulatory oversight.
Against the backdrop of an intense regulatory crackdown in the United States, marked by the U.S. Securities and Exchange Commission (SEC) filing lawsuits against Binance and Coinbase, the recent development underscores ongoing scrutiny faced by the crypto industry.
In August 2022, the FCA implemented more stringent regulations to address deceptive advertisements concerning high-risk investment products. However, these measures did not include cryptocurrencies, as the regulator was awaiting government confirmation to extend its oversight to crypto products.
In its recent announcement, the FCA stated that the actions taken to address crypto advertisements align with the restrictions implemented last year for promoting high-risk investments. The FCA is also seeking feedback on additional guidelines outlining obligations for crypto advertisers. Interested parties have until Aug. 10 to give their input during the consultation process.