On the inaugural day of the new promotional regulations, the UK’s financial regulator, the Financial Conduct Authority (FCA), issued 146 notices targeting cryptocurrency-related violations.
The recently released FCA manual provides a comprehensive framework for the marketing practices of cryptocurrency firms, including major exchanges like Coinbase, Kraken, and DCCG.
Recognizing the dynamic nature of the cryptocurrency market, the 32-page guide aims to ensure that advertisements are ‘fair, transparent, and devoid of misleading information.’ It also anticipates potential future regulatory adjustments due to the industry’s inherent dynamism.
Despite facing pressure to adopt a more lenient stance, the FCA maintains its firm position. As of August 2022, the regulator estimates that around 5 million adults in Britain held cryptocurrency assets. These investors, who may later regret impulsive cryptocurrency investment choices, are the primary focus of these new regulations.
The FCA emphasized that the guidance doesn’t impose new obligations on firms but pertains to their existing regulatory responsibilities. Following it is not obligatory for achieving compliance with the pertinent rule or requirement.
Nevertheless, if an individual adheres to this guidance in situations envisioned by it, the FCA will consider that person as having fulfilled the associated rule or requirement. The list includes major cryptocurrency exchanges like Kraken and Coinbase.
James Daley, managing director of Fairer Finance, hailed the FCA’s move as a “good moment” to instate “proper regulation.”
He said : “At least now the marketing of it is regulated and that means that the FCA has been issuing warnings and ensuring that misinformation is stopped.”
Laith Khalaf, AJ Bell’s head of investment analysis, agreed with Daley. According to him, the FCA is “making progress” in regulating cryptocurrencies.
A sizeable portion of investors, he cautioned, had invested “too much money” in these currencies due to “very unrealistic expectations.” He continued by saying that he thought these people would gain from stronger regulation.
The FCA’s choice to oversee the promotion of cryptocurrency investments has sparked controversy. Skeptics raise doubts about the reliability and lasting value of these currencies, which derive their value from blockchain technology.
Critics argue that subjecting them to regulatory oversight may create a “halo effect,” leading investors to perceive them as more credible due to apparent regulatory approval.
Chris Randell, the former chair of the FCA, recently remarked that fraud was “a feature, not a bug” within a significant portion of the cryptocurrency sector.
Some critics have proposed that subjecting these assets to the FCA’s stringent regulation could stifle beneficial innovation. City Minister Andrew Griffith expressed concerns about the perceived severity of the rules in a letter to the FCA on October 5, just before the introduction of the new regulations.
He urged the regulator to exercise “forbearance” as the rules were implemented, citing feedback from market participants.
Despite these concerns, Daley emphasized the importance of regulation, stating, “It would be quite difficult to eliminate cryptocurrency altogether, so if we see the advantages of this technology, it is better to try to harness and regulate it safely.”
The FCA, emphasizing the importance of regulation, declared that it had conducted extensive consultations with the crypto asset industry, both domestically and globally, to support market participants in their readiness for the new regulations.
The regulatory authority also highlighted its willingness to be flexible in the implementation of certain rules that demanded substantial technical development. However, it stressed that failure to comply would result in actions taken to eliminate illicit content and safeguard consumer interests.
Despite these concerns, some cryptocurrency investment platforms have welcomed the tighter rules.
Luno, for example, paused the sign-up of new UK customers and introduced a test for existing customers to ensure they understood the risks of their investment. The company hailed the new rules as an,“important step for the crypto industry.”