UK introduces new rules for promotion of high-risk assets; crypto in the crosshairs

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The U.K’s Finan­cial Con­duct Author­i­ty (FCA) has chalked out tougher rules for the mar­ket­ing of high-risk invest­ment prod­ucts, but the new rules do not yet apply to cryp­tocur­ren­cy pro­mo­tions, accord­ing to an Aug. 1 press release.

The FCA is wait­ing for the pass­ing of leg­is­la­tion to see how cryp­to pro­mo­tions come under its purview before pub­lish­ing final rules for the indus­try, the press release said.

Accord­ing to the reg­u­la­tor, cryp­tocur­ren­cies are high-risk assets, and investors should be pre­pared to lose all mon­ey if they invest in them. There­fore, the rules for cryp­to mar­ket­ing will fol­low the same approach as the new rules intro­duced for oth­er high-risk assets.

Under the new rules, firms need to clear­ly and promi­nent­ly state risk warn­ings while incen­tives to invest like refer­ral sys­tems are banned.

The rules come as part of the FCA’s con­sumer invest­ment strat­e­gy to reduce the num­ber of peo­ple invest­ing in high-risk assets, the reg­u­la­tor said. The FCA’s step fol­lows con­cerns that a sig­nif­i­cant num­ber of high-risk asset investors do not prop­er­ly under­stand the risks involved and do not think los­ing mon­ey is one of the risks.

The FCA has been under­tak­ing an active role in tack­ling finan­cial pro­mo­tions this year. As of July 2022, the FCA inter­vened in 4,226 adver­tise­ments and forced them to be amend­ed or withdrawn.

Sarah Pritchard, FCA Exec­u­tive Direc­tor, Mar­kets said:

‘We want peo­ple to be able to invest with con­fi­dence, under­stand the risks involved, and get the invest­ments that are right for them which reflect their appetite for risk.”

Accord­ing to Pritchard, it is more impor­tant than ever that high-risk finan­cial prod­ucts come with the right risk warn­ings since the increase in the cost of liv­ing could dri­ve peo­ple to look for high­er returns through high-risk investments.

Post­ed In: U.K., Reg­u­la­tion

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