New UK rules governing advertising around cryptocurrency are to come into force from 8th October.
The Financial Conduct Authority is making it a requirement for cryptoasset promotions to carry risk warnings while also introducing a ‘cooling off’ period for first-time investors and an outright ban on referral bonuses.
Examples of how they might warn investors – offered by the FCA – include that they should not expect protection “if something goes wrong” and be “prepared to lose all the money you invest”.
“It is up to people to decide whether they buy crypto,” said Sheldon Mills, executive director of consumers and competition at the FCA.
“But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.
“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.”
Estimated crypto ownership in the UK more than doubled between 2021 and 2022, according to the FCA, with 10% of respondents to a survey saying they owned cryptoassets.
Last month the Treasury Committee of UK MPs called on the government to regulate consumer trading in unbacked cryptoassets as a form of gambling.
In its report, the cross-party committee of MPs claims that cryptocurrencies such as Bitcoin have no intrinsic value and serve no useful social purpose, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.
“The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a Wild West,” said Harriett Baldwin MP, chair of the Treasury Committee.
“Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.
“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such.
“By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”