British consumers buying cryptoassets will get a 24-hour “cooling-off” period for the first time from October under tougher marketing rules unveiled by the financial regulator on Thursday.
Cryptoassets, such as Bitcoin, have little direct regulation globally, but regulators are taking a closer look after the downfall of FTX last year, which left millions of investors nursing losses totalling billions of dollars, some of them in Britain.
The Financial Conduct Authority (FCA) said “refer a friend” bonuses for crypto buyers would also be scrapped and that those promoting such assets would have to put in place clear risk warnings and ensure adverts were clear, fair and not misleading.
The new crypto rules, which are similar to those imposed by the FCA last year to tackle advertising for high-risk investment in mainstream finance, come as Britain plans to regulate cryptoassets under a new financial services law this year.
“It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision,” said Sheldon Mills, executive director at the FCA’s consumers and competition division.
“Consumers should still be aware that crypto remains largely unregulated and high risk,” he said.
FCA research shows that estimated crypto ownership has more than doubled from 2021 to 2022, with 10 percent of 2,000 people surveyed stating they own cryptoassets.
Under the new rules, crypto firms will have to carry warnings such as: “Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.”
Myron Jobson, senior personal finance analyst at investment platform interactive investor, welcomed the new rules, noting that crypto advertising had become a “wild west of dubious claims and misleading information”.
“The challenge for the regulator is to devise a robust customer knowledge framework so that all the players involved know what good looks like,” he said.
© Thomson Reuters 2023