The UK’s financial watchdog is preparing to toughen up rules on advertising for high risk investments including crypto in a bid to protect customers.
The FCA today published a consultation outlining proposals that will force companies to provide much more prominent warnings on high-risk investment products, prevent companies from offering incentives to encourage investments and change declarations.
It comes a day after crypto companies were left reeling by a Treasury announcement that advertisements for digital assets will subjected to the same regulatory regime for financial promotions as products including stocks and insurance.
“Too many people are being led to invest in products they don’t understand and which are too risky for them,” said Sarah Pritchard, executive director of markets at the FCA.
“People need clear, fair information and proper risk warnings if they are to invest with confidence, which is the central aim of our consumer investment strategy,” she added.
A recent survey by the watchdog revealed that 69 per cent of 18 to 40 year olds who invest in crypto assets believed them to be FCA regulated, adding urgency to the drive to increase oversight promotions for crypto assets.
In guidance published today the FCA said it plans to strengthen risk warnings, ban inducements to invest, introducing positive frictions, improving client categorisation and introduce stronger appropriateness tests which assess a consumer’s level of experience and knowledge.
The UK’s Advertising Standards Agency has already labelled crypto assets a red alert priority for the regulator and has so far banned digital asset promotions by Arsenal, Coinbase and Papa John’s pizza among others.
In comments to City A.M. Lisa Cameron, the MP behind parliament’s first all-party group on crypto assets, said the government has hitherto been “cautious” in its approach to regulation.
“We want to see a robust, and well regulated crypto sector in the UK that champions high standards in terms of consumer protection whilst harnessing the opportunity of the sector to ensure the UK is world leading in safe and robust application of crypto finance,” said Cameron. She added that there is “growing pressure for regulators and Government to keep pace with the rapid advancements in technology and increased adoption of crypto by consumers.”
The FCA’s consultation on promotions for high risk investments, including crypto, will close in March this year.