Under new FCA rules, crypto firms will have to change their approach to marketing as the body looks to ensure that consumers have knowledge of the industry before investing. 

In a new regulatory framework set to be finalised in the coming weeks, the group emphasised that it must take clear steps to warn of the risks involved with crypto. 

The change comes amidst FCA research detailing that there is ‘a growing mismatch’ between consumers’ investment decisions and their risk tolerance, which it warned could result in significant financial damage to consumers. 

Commenting on the steps, Sheldon Mills, FCA Executive Director, Consumers and Competition, underlined that it is aiming to give consumers deeper information when entering the crypto space.  

Mills stated: “It is up to people to decide whether they buy crypto. 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.

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”

Su Carpenter, Director of Operations at CryptoUK, emphasised that measures like this are ‘critical’ to the industry continuing to have success and ensuring high standards of communication in financial promotions. 

Nonetheless, Carpenter added: “We do ask that any regulation also empowers consumers to invest and transact in crypto assets safely and confidently, whilst keeping in mind that there are multiple additional use cases for this technology outside of just investments. These would also be subject to any restrictions on providers promoting their technology and services.

“The requirement that all approvers of financial promotions have an understanding of crypto assets and have permission to act as an approver also has the potential to introduce an overly restrictive regime, based on the incredibly small number of organisations which would meet that criteria for approver status.”

As a result of the new regulations, refer a friend bonuses will also be outlawed and firms must ensure that marketing is not misleading. It also stated that first-time investors should be required to take a 24 hour cooling off period following investment. 

The FCA also detailed in its report that consumers should be warned with a personalised pop-up message of the risks of investment. 

Sharing concerns over the new frameworks, Carpenter continued by outlining hopes that the new implementation doesn’t lead to ‘disproportionately restrictive barriers and create an unbalanced environment’. 

“There is a risk that this solution will both unfairly concentrate market power for those firms which are already authorised and potentially encourage unauthorised firms to operate from outside of the UK, creating a competitive disadvantage for UK-based organisations and also potentially undermining consumer safeguards,” Carpenter added. 

“Additionally, in relation to the cooling off period, the principle we agree with, but question the length of the duration being proposed (as this is not aligned with other jurisdictions) and would welcome evidence based findings on the rationale behind this proposal.”