The U.K.’s crypto industry has been put on alert by the Financial Conduct Authority (FCA), which has warned that new restrictions on financial promotions are on the horizon. The FCA stated that breaches of these new rules could result in a prison term of up to two years.
The exact details of the restrictions have yet to be finalized, but the FCA indicated that they will be similar to those for other high-risk investments, requiring promotions to be clear and fair, and offering customers a 24-hour cooling-off period.
FCA is taking a hard line on crypto promotions in the UK. All firms, whether based in the U.K. or overseas, will be expected to comply with the new rules, regardless of the technology used to make the promotion.
Spokesperson for the FCA.
The move by the FCA is part of a wider trend of regulatory action on crypto ads. In the U.S., Adrienne A. Harris, Superintendent of the New York Department of Financial Services (NYDFS), has taken steps to regulate crypto ads. The NYDFS launched a regulatory framework for virtual currency firms operating in New York in 2018, which included restrictions on advertising to protect consumers.
While regulation of crypto promotions is necessary to protect consumers, too much regulation can harm the sector. On one hand, false or misleading crypto ads can lead to financial losses for consumers. On the other hand, excessive regulation can stifle innovation and limit the growth of the crypto industry.
As the U.K. crypto industry awaits the details of the new restrictions, it remains to be seen how the FCA will balance the need for consumer protection with the need to foster innovation in the sector. One thing is for certain, however, the FCA’s warning has put the U.K. crypto industry on notice, and companies will need to be proactive in preparing for the new restrictions on financial promotions.