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UK’s New Rules to Tackle Crypto Cold Calls After $227,000 Scam

Published September 12, 2023 12:55 PM
Omar Elorfaly
Published September 12, 2023 12:55 PM

Key Takeaways

  • The UK government will introduce a new financial promotions regime for crypto firms.
  • The new regime will limit crypto promotions in the UK.
  • UK crypto firms will no longer be allowed to make cold calls.

The UK’s Financial Conduct Authority (FCA) released a new financial promotions regime  for crypto firms that is separate from its prior Economic Crime and Corporate Transparency Bill. The new regime focuses on promotion efforts taken by crypto businesses, protecting customers from potential scams.

One key point within the regime is in regard to cold calls companies make to potential investors to promote crypto products.

The New Crypto Regime

According to the new regime ’s text, “These rules aim to reduce and prevent harm to consumers from investing in crypto assets that do not match their risk appetite.

It is up to consumers to decide whether they buy crypto assets, but they should do so based on fair and accurate information that helps them make effective investment decisions. The rules will also create a fairer and more consumer-focused landscape for firms to compete and innovate in.”

Crypto businesses, whether legitimate or not, rely heavily on promotions through different mediums, such as social networking platforms, to attract a wider pool of consumers. 

“The regime is designed to be technology neutral and applies to a broad range of communications including websites, blog posts, mobile phone apps and many other types of content.”

“We expect that the vast majority, if not all, websites and apps that enable a UK consumer to invest in crypto assets will be in scope of the financial promotions regime.”

The FCA is not limiting control customers in the UK; according to the FCA “ If a UK consumer can access and respond to cryptoasset promotions to engage in the cryptoasset activities, such as through websites, apps and/or social media, it is likely that those promotions will be capable of having an effect in the UK.”

Social Media

The UK government released a separate document  regarding the regulation of the use of social media in the crypto sector.

According to the document “Social media is being used by many consumers as a go-to source of information, and this is reflected in advertising trends.

The AA/Warc expenditure report found that the UK social media advertising market was worth £6.4bn in 2021, representing nearly a third of all internet advertising spend.

It is crucial that financial promotions on social media are of good quality and are fair, clear and not misleading.

Consumers should be able to trust that the information they receive online about financial products and services is reliable.”

Moreover, “In Q4 of 2022, 69% of financial promotions communicated or approved by authorized firms which were amended or withdrawn following our intervention involved website or social media promotions.”

Cold Calls

The new promotion regime also focuses on “Non-digital medium” which include TV/radio, phone calls, and postal communication.

This is particularly important since many investors have claimed to be victims of crypto scams through cold calls made by crypto businesses.

In one case, one woman from Norfolk lost £180,000  (~$227,000) to a cryptocurrency scam. 

The victim said she was contacted regularly by the scammers over the period of six months, slowly gaining her trust and convincing her to give them access to her phone and laptop so they could transfer sums of money in separate installments.

“My first reaction when I was told I had been scammed was feeling very frightened for my future, as the scammers left me with nothing,” said the victim, adding, “Life will never be the same, and I am trying to come to terms that some people can be so ruthless.”

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