Last updated on June 15th, 2023 at 09:56 am
The Financial Conduct Authority (FCA) of the United Kingdom announced on June 8, 2023, that it would introduce stringent regulations to improve investor protection and promote a better understanding of risks among investors.
The new regulations, effective from October 8, 2023, primarily target cryptocurrency services in the country. These regulations also align with the new government legislation to bring crypto promotions under regulatory oversight.
The FCA’s new rules prohibit cryptocurrency companies from implementing referral programs or offering “refer a friend” bonuses. Furthermore, those involved in promoting cryptocurrencies must adhere to strict guidelines, including providing transparent risk warnings and ensuring that their advertisements are fair, clear, and free from any misleading information.
The financial regulator also required crypto companies operating in the UK to establish a cooling-off period for individuals investing for the first time. Crypto companies must also verify the eligibility of individuals in terms of their knowledge and experience before allowing them to participate in crypto investments on their platforms.
According to Sheldon Mills, the Executive Director of Consumers and Competition at FCA, the decision to purchase cryptocurrencies ultimately rests with individuals. He highlighted that the new regulations provide people with adequate time and appropriate risk warnings to enable them to make well-informed choices.
Mills emphasized the need for consumers to know that the crypto market largely lacks regulation and carries substantial risks. Therefore, individuals who choose to invest in cryptocurrencies must be prepared for the possibility of losing their entire investment.
Mills also stressed the importance of the crypto industry proactively preparing for these significant regulatory changes.
Meanwhile, in a joint statement issued on April 6, 2023, the FCA and the Advertising Standards Authority (ASA) warned financial influencers, known as “finfluencers,” about endorsing fraudulent investment schemes on social media platforms. Both authorities also published an infographic and checklist to assist influencers in their decision-making process when approached to promote financial products. This visual resource highlighted the essential factors influencers should consider before engaging in brand partnerships for financial products and services.
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