The Financial Conduct Authority (FCA) of Britain has taken steps to strengthen regulations surrounding the promotion and sale of cryptocurrencies in order to safeguard consumers.
The lack of oversight and the prevalence of promises regarding high returns in the volatile cryptocurrency market has long been criticized, prompting the FCA to introduce a package of measures.
Starting from October, companies promoting crypto products or services in Britain will be required to provide a “clear warning” to customers about the potential loss of money in high-risk investments. Additionally, marketing firms will need to implement a cooling-off period specifically for first-time cryptocurrency investors. The FCA also plans to prohibit “refer a friend” bonuses that serve as incentives for crypto investments.
Sheldon Mills, the head of consumers and competition at the FCA, explained, “Our rules give people the time and the right risk warnings to make an informed choice.”
Earlier this year, the British government introduced legislation to bring cryptocurrency promotions under the FCA’s jurisdiction. Moreover, lawmakers in the UK are pushing for the regulation of crypto investments similar to the regulations in place for the gambling industry.
Responding to the FCA’s announcement, Su Carpenter, the director of operations at CryptoUK, an industry group, expressed concerns about the potential impact on new entrants. Carpenter stated, “There is a risk that this solution will both unfairly concentrate market power for those firms which are already authorized and potentially encourage unauthorised firms to operate from outside of the UK.” She further added that such a situation could create a competitive disadvantage for UK-based organizations and undermine consumer safeguards.
The FCA’s actions align with a broader trend of tightening regulations in the United States. The Securities and Exchange Commission (SEC) recently filed a lawsuit against Coinbase, the largest digital currency trading platform in the US, accusing it of unlawfully facilitating the trading of crypto asset securities. The SEC has also brought charges against Binance, a peer of Coinbase, and its founder Changpeng Zhao for numerous alleged securities law violations.
These developments come on the heels of the collapse of FTX, a major cryptocurrency exchange, in November. The failure of FTX has raised concerns and sparked debates about the state of the cryptocurrency market, with some critics referring to it as the “Wild West.”
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