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According to marketing specialists and participants, the new rules in the UK are showing “progress” in controlling the most extreme aspects of promoting crypto investments. This comes after authorities released 146 alerts about misconduct on the first day of regulation.
Following the industry’s oversight on October 8, the Financial Conduct Authority cautioned consumers about companies offering cryptocurrency assets without the necessary regulatory approval.
The FCA took decisive action despite pressure from a government minister to show leniency towards companies struggling to meet the demands of the new regulatory framework on time, as per the Financial Times.
The regulator estimated that 4.97 million British adults held some crypto assets in August 2022. The FCA mentioned that upon announcing the new rules, many investors regretted their impulsive decision to invest in crypto and emphasized the importance of receiving “accurate risk warnings” for making informed choices.
Sheldon Mills, the FCA’s executive director for consumers and competition, cautioned, “Consumers should remain mindful that crypto is largely unregulated and high-risk,” in June.
James Daly, managing director of Fairer Finance, a firm advocating for improved treatment of financial services consumers, remarked that it was an opportune moment to introduce “proper regulation” in the sector.
He highlighted that the FCA’s regulation of marketing means it is issuing warnings and curbing misinformation, stating, “At least now its marketing is regulated and that means the FCA is issuing warnings and making sure the misinformation is stopped.”
Laith Khalaf, head of investment analysis at investment platform AJ Bell, acknowledged the FCA’s progress in regulating cryptocurrencies. He noted that while most UK investors viewed it as a high-risk bet and invested small amounts, there was a significant minority who placed “a lot of money” based on “very unrealistic expectations,” expecting to benefit from improved regulation.
Some skeptics doubt the FCA’s decision to regulate the marketing of cryptocurrency investments. They argue that treating them as regulated investments risks creating a “halo effect” and may not have reliable, long-term value. Chris Randall, former chairman of the FCA, told the FT this month that fraud is “a feature, not a bug” of much of the cryptocurrency sector.
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Others have suggested that subjecting assets to stringent FCA regulation risks stifling innovation. Cities minister Andrew Griffiths urged the FCA to show leniency to market participants concerned about the strictness of the rules just before they came into force.
Daly stressed the importance of regulation, stating, “It would be very difficult to completely eliminate cryptocurrencies, so if we see the advantages of this technology, it would be better to try to use and regulate it safely,”
The FCA mentioned it has been extensively engaging with the crypto asset industry in the UK and abroad to help market participants prepare for the new rules, which cover how assets are promoted to consumers. It also offered flexibility in implementing parts of the rules that required greater technical development.
However, it added, “Where companies do not follow our rules, we will take action to remove illegal content and protect consumers.”
Some cryptocurrency investment platforms have welcomed the more stringent regulations. Luno announced a pause in sign-ups for new UK clients in October and launched a trial for existing clients to understand their investment risks.
They hailed the new regulations as “an important step forward for the crypto industry.”
Michael Johnson, head of compliance at Xumo, another crypto investment platform, emphasized that “the right regulatory regime, delivered at the right speed,” will be crucial for the UK to realize its potential as a global hub for crypto technologies.
However, SNP MP Martin Docherty-Hughes, the party’s former spokesperson on blockchain technologies, remarked that while the sector needed a stronger regulatory regime, the FCA lacked the necessary resources.
“They are like other public sector bodies, stretched to within an inch of their lives,” said Docherty-Hughes, MP for West Dunbartonshire. “This requires more investment and more people in the FCA.”
Source: www.ft.com
