- Through the Consumer Investment Strategy, the FCA seeks to give consumers the confidence to invest and reduce the number of people who invest in high-risk products that are not aligned with their needs.
- This proposal calls for tightening restrictions on crypto asset advertising to protect investors who may not fully understand the risks they are taking by investing in cryptocurrencies.
The Financial Conduct Authority (Financial Conduct Authority, FCA) of the United Kingdom, plans to control more firmly everything related to the advertising of cryptocurrencies and high-risk investments, and allow only the most experienced and wealthy high-value investors to participate in this market.
Through a official statement, the authority presented the “Consumer Investment Strategy” with which it pointed out that these measures are to monitor everything related to the marketing of cryptocurrencies, that is protect investors and alert them to possible operations in which they may be seduced, without taking into account the dangers they assume by participating.
Actions to be taken by the FCA
That strategy will be put in place once the government gives it the power to regulate the industry, thus protecting investors who may not fully understand the risks they are taking.
Approved this draft will seek to categorize crypto assets so that they qualify as “Restricted Mass Market Investmentsmeaning that consumers will only be able to respond to crypto asset financial promotions if they are classified as restricted, high net worth or sophisticated investors.
The FCA seeks:
- Restrict advertising on investments linked to crypto assets, micro crowdfunding, peer-to-peer (P2P) deals, retail mini-bonds, and speculative liquid securities.
- That consumers respond to financial promotions of crypto assets, only if they are classified as restricted, high net worth or sophisticated investors.
- Being able to continue its denial policy for some consumer investment firm license applications.
Rise of online scams
Among the stimuli that have caused the FCA to focus on this task are the online investment scams that have proliferated since the pandemic began in 2020. So much so, that the Advertising Standards Authority (ASA) has had to reject one in five license applications from consumer investment firms and has stepped in to ban misleading ads on several occasions.
“Too many people are being induced to invest in products they don’t understand and that are too risky for themSarah Pritchard, executive director of markets at the FCA, said in the statement.
As part of the plan, the FCA carries out a public consultation on different points of the project of norms, having as deadline the next 23 March, and has announced that the final rules could be publicly disclosed in mid-2022.
will pass the test
Those companies that seek to publish promotions related to the crypto world and have the approval of the regulations established by the FCA, must have 2 main supports:
- Have experience that qualifies them to a good degree, and
- That they have the necessary and timely knowledge to support the investments they want to offer to the public interested in venturing into the ecosystem.
Likewise, they are obliged to issue each of their promotions in a clear, fair and in no way misleading.
“Those looking to make certain high-risk investments will also be asked more forceful questions about their investment knowledge and experience, after research revealed that many consumers were investing without being aware of the risks.”, was added in the statement.
The recent statement issued by the FCA is not the first public statement that seeks to alert consumers to be extremely cautious when wanting to benefit from the rise of cryptocurrencies.. On previous occasions they have been warned to be ready to lose everything, because they are concerned about, among other things, the volatility of prices, the complexity of the products offered and the lack of regulation towards the consumer around many of the products.
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