British consumers buying cryptoassets will be given a 24-hour “cooling off” period for the first time since October under tougher marketing rules unveiled by the financial regulator on Thursday.
Crypto-assets such as bitcoin are not directly regulated globally, but regulators are taking a closer look after the FTX crash last year, which left millions of investors suffering losses totaling billions of dollars, some of them in the UK.
The Financial Conduct Authority (FCA) said that “refer a friend” bonuses for crypto buyers will also be removed, and that those promoting such assets will have to introduce clear risk warnings and ensure that advertisements are clear, fair and not misleading.
The new crypto rules, which are similar to those imposed by the FCA last year to tackle the advertising of high-risk investments in mainstream finance, come as Britain plans to regulate crypto assets under a new financial services law this year.
“It’s up to people to decide whether to buy crypto. But research shows that many regret taking a rash decision,” said Sheldon Mills, executive director of the FCA’s consumer and competition division.
“Consumers should still be aware that crypto remains largely unregulated and high-risk,” he said.
An FCA survey shows that estimated crypto ownership more than doubled from 2021 to 2022, with 10 percent of the 2,000 people surveyed saying they own crypto assets.
Under the new rules, crypto firms will have to carry warnings such as: “Do not invest unless you are prepared to lose all the money you invest. It’s a high-risk investment and you shouldn’t expect to be protected if something goes wrong.”
Myron Jobson, senior personal finance analyst at investment platform interactive investor, welcomed the new rules, noting that crypto advertising has become a “wild west of dubious claims and misleading information.”
“The challenge for the regulator is to create a robust know-your-customer framework so that all players involved know what good looks like,” he said.
© Thomson Reuters 2023