The UK’s Financial Conduct Authority (FCA) recently proposed some strict new rules for how crypto companies market their products and services to clients. If passed, the regulations would clamp down on misleading hype and unrealistic promises, requiring more transparency and balanced information.
according According to the FCA release, the new rules, which will apply to first-time investors in the UK wishing to purchase crypto assets, will require companies to submit a cooling-off period from October 8, 2023. The FCA has also opened consultations on the matter until August 10.
New rules for companies promoting crypto products or services
Essentially, the FCA wants to treat cryptocurrencies as high-risk investments as part of its post-Brexit financial strategy that was unveiled in February. In 2022 alone, the Financial Conduct Authority (FCA) forced companies to correct 8,582 misleading promotions.
The regulator is concerned that cryptocurrency newbies do not fully understand the risks of these volatile and unregulated assets. With the value of major cryptocurrencies fluctuating wildly, those promoting cryptocurrencies must also put up clear risk warnings and ensure that advertisements are clear, fair, and not misleading.
According to the announcement, companies promoting crypto products or services will need to include a clear warning of the risks such as: ‘Do not invest unless you are prepared to lose all the money you invest. This is a high risk investment and you shouldn’t expect protection if something goes wrong. Take two minutes to learn more.
A comprehensive set of guidance advisories will be published, and will spell out the rules companies must follow to ensure that cryptocurrency-related advertisements are not misleading. In addition, promotions that appear to attract cryptocurrency investors, such as “refer a friend” programs, will no longer be allowed.
The total market cap drops to $1.067 trillion | Source: Crypto Total Market Cap on TradingView.com
US Treasury Secretary Yellen wants more regulation
Regulators from major powerful countries continue to search for legislation arguing that there are no regulations in place to oversee the cryptocurrency industry. Despite this, there has not been much development yet.
Recently, Janet Yellen, the current US Treasury Secretary and former chair of the Federal Reserve, expressed concern about the lack of regulation in the cryptocurrency market. She argues that the United States Congress should do more to pass laws that protect investors and curb illegal activity.
During an interview with CNBC’s Squawk Box, Yellen stated, “I see some holes in the system where additional regulation would be appropriate.”
The era of unchecked hype by companies in the UK cryptocurrency space may be approaching. While regulation can curb crypto crime and protect consumers, lawmakers need to be careful not to stifle innovation. The cryptocurrency market continues to grow rapidly, and many see digital assets as the future of finance.
Featured image from iStock, chart from TradingView.com
