Taking a page from its own playbook, the UK regulator modeled the new regulations on those it currently imposes among known high-risk investments in the traditional finance arena.
The UK regulator, the Financial Conduct Authority, has stepped up its efforts to protect consumers against potential loss when investing in crypto assets and the companies that manage them.
On June 8, the financial market watchdog, which oversees 50,000 companies in the UK to ensure fair, honest, and competitive financial markets, announced that it has introduced new marketing rules formulated specifically for companies related to cryptocurrencies.
What the UK Regulator Wants: Clear Risk Warnings and “Cooling Off” Period
In its drive to promote consumer protection, the highly touted regulatory body has chosen to view cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and Litecoin, among many others, as high-risk and restricted mass-market investments. In doing so, the UK regulator will now require crypto companies to add detailed risk warnings in their various marketing campaigns such as advertisements.
Meanwhile, crypto asset owners or users will no longer be able to enjoy earning rewards by recruiting people to buy digital currencies using a particular platform, as the “refer-a-friend” scheme will now be prohibited.
Additionally, the financial regulator came up with the idea to impose a 24-hour “cooling off” period for first-time crypto investors. This means that new customers will have to wait at least one full day after successfully registering a valid merchant account before they can make any type of purchase.
Sheldon Mills, chief executive of the UK regulator’s Competition and Consumer Division, offered a brief explanation on the enforcement of these rules which will come into force on October 8, 2023:
“It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Consumers should still be aware that crypto remains largely unregulated and high risk.”
Not Without Resistance
While it is within the mandate of the UK regulator to formulate regulations that will protect consumer welfare, some crypto companies within the UK refuse to turn around and accept what is to come.
CryptoUK, an in-country trade association for the crypto industry that observes self-regulation, seems to need more reasons why the “cooling off” period should last 24 hours. According to COO Su Carpenter, his organization would greatly appreciate the opportunity to review the findings that contain strong evidence that the 24-hour “cooling off” period is really necessary.
In addition, Carpenter said they hope that the relevant regulations being enforced will allow consumers to confidently transact and invest in crypto assets, as they have other use cases than just being investments.
It is worth noting that digital asset regulation in the UK is partly overseen by the country’s Financial Conduct Authority, whose aim is to ensure that crypto businesses comply with anti-money laundering and counter-terrorist financing requirements.
The UK government has for some time been advancing the Financial Services and Markets Bill, legislation that proposes to regulate stablecoins as well as support “safe cryptocurrency adoption” in the country.
By Audy Castaneda
