The Monetary Conduct Authority (FCA) has mentioned it would clamp down on advertising for cryptocurrency companies and different high-risk investments in a bid to decrease the variety of individuals investing in doubtlessly loss-making belongings.
The worth of cryptocurrency began booming close to the beginning of the Covid-19 pandemic main many individuals to start out investing within the extremely risky currencies.
However the previous yr has seen wild fluctuations within the worth of Bitcoin, which is essentially the most sought-after cryptocurrency. In July the worth of 1 Bitcoin fell as little as £21,000 earlier than rising quickly to a peak slightly below £50,000 by the start of November. Since then, its worth has once more plummeted by practically 50 per cent to simply £31,000.
The FCA mentioned it needed to handle issues concerning the ease and pace with which individuals could make high-risk investments by proposing a big strengthening of its guidelines on how high-risk monetary merchandise are marketed.
Underneath newly proposed guidelines, it would guarantee companies that approve and talk monetary advertising enhance their threat warnings on advertisements and ban incentives to take a position, for instance new joiner or refer-a-friend bonuses.
These seeking to make sure high-risk investments would even be requested extra strong questions on their data and funding expertise, after analysis discovered many shoppers have been investing with out being conscious of the dangers.
The FCA’s draft guidelines embrace proposed restrictions on the advertising of cryptoassets, in preparation for the federal government bringing the promotion of those high-risk investments underneath the FCA’s remit.
When it does, it plans to classify qualifying cryptoassets as ‘Restricted Mass Market Investments’, which means shoppers would solely have the ability to reply to cryptoasset monetary promotions if they’re classed as restricted, excessive net-worth or refined traders.
Corporations issuing such promotions must adhere to FCA guidelines, such because the requirement to be clear, honest and never deceptive.
Sarah Pritchard, government director of markets on the FCA, mentioned: “Too many individuals are being led to put money into merchandise they don’t perceive and that are too dangerous for them. Folks want clear, honest info and correct threat warnings if they’re to take a position with confidence, which is the central goal of our shopper investments technique.”
A surge in funding scams, notably on-line ones for the reason that pandemic in 2020, has prompted the regulator to take motion, corresponding to refusing one in 5 licence functions from shopper funding companies within the yr ended March 2021.
In June, Scotland Yard mentioned it had seized a record £114m of Bitcoin as a part of an investigation into cash laundering offences.
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