UK cryptocurrency Scams Surge, Regulators Take Action: BEIJING, Jan. 19 (Reuters) – Britain’s financial regulator said on Wednesday (Jan. 19 local time) that it plans to restrict the marketing of crypto assets and other high-risk investment products.
Since the start of the new crown pneumonia epidemic in the United Kingdom in 2020, the number of investment fraud cases represented by online methods has increased sharply, which has also prompted the regulatory authorities to take necessary response actions. The Financial Conduct Authority said the draft regulation paves the way for the government to bring the marketing of crypto-assets into the regulatory purview. At present, the draft has entered the process of soliciting public suggestions and comments.
In a statement, the FCA stated: “Following the implementation of the regulatory scheme, the FCA plans to classify eligible crypto assets as ‘restricted mass-market investment’ products, meaning that consumers can Respond to financial promotions of crypto assets only if they are classified as restricted, high net worth or sophisticated investors. Businesses promoting crypto assets must comply with a series of regulations from the Financial Conduct Authority, such as ensuring clarity and fairness, in addition to Investors must not be misled.”
Spain moved this week to regulate crypto advertising, including by social media influencers.
Among other prominent figures to promote the emerging tech are the actor Matt Damon, who has fronted a campaign to promote digital asset platform Crypto.com.
(Graphic: FCA Graphic on High Risk Investments: )
‘CLEAR, FAIR AND NOT MISLEADING’
The draft rules, put out to public consultation, also prepare the ground for Britain to bring promotions of crypto assets under the watchdog’s remit for the first time, following a finance ministry announced on Tuesday.
The watchdog plans to categorize some crypto-assets as “restricted mass-market investments,” meaning consumers can only respond to promotions if they are classed as restricted, high net worth, or sophisticated investors.
“Firms issuing such promotions would have to adhere to FCA rules, such as the requirement to be clear, fair, and not misleading,” it said in a statement.
Removing crypto assets from the reach of ordinary people should go a long way to stemming the growing gamified approach to investing, said Pippa Tasker, partner at law firm CMS.
Retail investors too often follow the advice of influencers on social media without researching products or their risks, she said.
Under the proposed rules, firms that approve and publish promotions must have relevant experience and understanding of the investments offered, the FCA said. People looking to make high-risk investments would also face stricter questions on their knowledge and investment experience.
PIMFA, an industry body for financial advisers, welcomed most of the proposals, but added there was a role for high-risk investments, which were not necessarily bad despite being risky.
The FCA will set out final rules in the summer. The crackdown is part of a wider strategy to buttress consumer protection, including a proposed consumer duty on firms.