Introduction

The UK Financial Conduct Authority (FCA) has introduced new rules that require crypto companies to include risk warnings in their ads and offer a “cooling off” period for novice investors.

Promoting Consumer Protection

In a move designed to promote consumer protection in the cryptocurrency industry, the FCA has mandated that crypto companies incorporate clear risk warnings in their ads starting October 8th. The new rules also dictate that these companies offer a “cooling off” period for first-time investors.

Risk Warnings

According to the FCA, typical risk warnings inform customers of the potential for complete loss and absence of guarantees if something goes wrong. Furthermore, if companies advertise cryptocurrency assets, including popular cryptocurrencies like bitcoin (BTC), they must provide a pause period for novice investors who are looking to invest.

Executive Director’s Statement

Sheldon Mills, Executive Director of the FCA’s director of consumers and competition, confirmed that the encryption sector remains highly unregulated and holds a high risk. Despite these risks, ownership of cryptocurrencies in the UK doubled between 2021 and 2022, according to the FCA survey.

Crypto Scams on the Rise

Furthermore, the FCA has noted the increase in encryption asset scams, with crypto scams reported escalating from 1,619 in 2019 to 6,372 in 2021.

Broader Plan for Harmonizing Crypto Regulation

The next regulations are part of a broader plan to harmonize cryptographic regulation with traditional assets like stocks and bonds, as revealed by the British Treasury in February.

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