As part of these sweeping reforms, new investors will be required to observe a 24-hour "cooling-off period" before completing their transactions. The government estimates that approximately one in every ten UK adults now owns some form of cryptocurrency.
Failure to comply with the new regulations could result in severe penalties, including up to two years imprisonment, fines, or both for company executives. Additionally, the ban on "refer a friend" advertisements will be enforced, and all crypto marketing must be "clear, fair, and not misleading."
These rules, slated to come into effect on October 8th, will apply to transferable and fungible crypto assets, encompassing popular digital currencies like Bitcoin. However, non-fungible tokens (NFTs) will not fall under the purview of these advertising rules, except for the prohibition on offering them as incentives for crypto investments.
Calls for increased regulation in the crypto sector have grown louder. A parliamentary committee recently likened cryptocurrency to gambling rather than a financial service. Furthermore, the gambling-helpline charity GamCare reported assisting over 300 individuals grappling with investments in cryptocurrency and online financial markets.
The Financial Conduct Authority (FCA) is implementing these changes following government legislation that granted it the authority to oversee the promotion of digital assets. The new rules will apply to all crypto marketing efforts in the UK, and the FCA is prepared to take strong action against violators, including taking their websites offline.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, highlighted research indicating that many individuals regretted making impulsive decisions regarding crypto investments. While the decision to invest ultimately lies with the consumer, the FCA's rules aim to provide adequate time and appropriate risk warnings for informed choices.
Mills emphasised that despite these measures, cryptocurrencies remain largely unregulated and carry high risks, advising investors to be prepared to lose their entire investment.
CryptoUK, an industry trade body, supports the concept of a cooling-off period but questions the proposed duration. They advocate for evidence-based findings to justify this particular timeframe. The organisation aims to foster a competitive and equitable environment for the crypto-asset industry, focusing on safety, innovation, consumer education, and information.
These changes reflect the ongoing efforts to establish a more regulated landscape for cryptocurrencies in the UK, promoting responsible investing while acknowledging the inherent risks involved.