FCA reveals plans to clamp down on Bitcoin and crypto promoters

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FCA reveals plans to clamp down on Bitcoin and crypto promoters

It comes as the Chancellor of the Exchequer Rishi Sunak highlighted plans to clamp down on unregulated and potentially misleading advertising for cryp

It comes as the Chancellor of the Exchequer Rishi Sunak highlighted plans to clamp down on unregulated and potentially misleading advertising for crypto products and services

The UK’s Financial Conduct Authority (FCA) has proposed tighter restrictions as it seeks to curb potentially harmful high-risk investing among consumers, including bets on Bitcoin and cryptocurrencies.

It comes as the Chancellor of the Exchequer Rishi Sunak highlighted plans to clamp down on unregulated and potentially misleading advertising for crypto products and services.

Sunak, on Tuesday, said that FCA should have oversight of such advertising which should be held to the same standard as the financial promotion of share trading, investment products and insurance.

The FCA today issued its own statement which went further. The Watchdog is recommending changes so that firms that promote financial marketing demonstrate their expertise, whilst suggesting a ban on investment incentives and a strengthening on risk warnings.

Crypto would no longer be outside the FCA’s jurisdiction in regards promotion and marketing, it proposed, due to its increasing attractiveness to retail investors looking to make a quick buck.

FCA research has also identified that one in 20 adults own, or have owned, a crypto-currency, as the high-risk, high-reward opportunities presented have force the Treasury to intervene to protect those looking to get involved.  

Crypto’s popularity has yet to be held back by a lack of a regulator. Indeed, most trades or ‘investments’ reside in something of a regulatory, legal and fiscal black-spot.

So, what does the FCA’s latest proposals actually mean for people with crypto assets?

“These changes, including other changes being consulted on by the Treasury, will hit providers of cryptoassets with a whole range of new costs as the new requirements seek to ensure the appropriateness of investors investing in these assets,” said Adam Soilleux, senior manager and financial services advisor at BDO

The investment in compliance upgrades will be significant, he noted.

When it comes to advertising specifically, the FCA’s regulations will only cover adverts created and marketed by providers of crypto assets.

The FCA’s own research meanwhile says advertising has only a limited impact in reaching and informing retail investors to tempt them into the digital assets market.

Data from the Watchdog claimed that only 2% of the people questioned would buy crypto from an advert when they previously hadn’t planned to, and only 5% of those who were thinking about buying made the leap because of an advert.

On the other hand, 39% of investors were said to get their information from social media, whilst a further 13% got their insights from traditional sources of news.

Laura Suter, head of personal finance at AJ Bell, reckons new rules “won’t stop the outright scams that have exploded off the back of Bitcoin and other cryptos soaring in price.”

A number of schemes and scams have made headlines in recent months, other controversial crypto ventures had certain potentially harmful stipulations coded in by their developers.

The Squid Game crypto, for example, saw the creators earn more than US$3mln, as the price surged from a cent to US$2856 a week before the system collapsed.

‘Pump and dump’, and other schemes, are said to be more prevalent in crypto markets which are without the same regulations as stock markets, derivatives or foreign exchanges.

Suter blames social media as being a greater concern than fintech marketing.

“What would have a far bigger impact is cracking down on social media accounts where people claim to have made their millions from buying Bitcoin, most of which are ultimately scams or glorified pyramid schemes,” Suter added.

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