FCA offers some breathing space for crypto firms faced with tough new rules
- Firms marketing crypto will need to introduce new rules to protect UK consumers by 8 October.
- The FCA has recognised some companies may need more time to implement changes and is offering extra breathing space to firms who apply for a delay.
- So those who apply for an extension may not need to bring in measures like a 24 hour cooling-off period for first time investors until January.
- The FCA’s new rules follow government legislation to bring crypto promotions into the regulator’s remit.
- The core new rules will still be introduced in October and the FCA has warned that those who breach them could be punished with an unlimited fine and up to 2 years in prison.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘”The Financial Conduct Authority shot out of the traps, harnessed with new powers and raced ahead with new rules to give consumers extra protection in the crypto Wild West., but it’s now recognised some crypto firms will struggle with the deadline which is fast approaching.
Crypto firms selling to UK consumers were warned back in February that they would need to get ready for regime change, but as the clock ticks down, the FCA is now willing to give some companies extra time to get their back office to deal with changes which will require more technical tinkering.
This includes the new 24-hour cooling-off period for new customers, with a deadline rolled back to January for those firm who apply to delay the implementation.
Such is the volatile nature of the crypto markets that coins and tokens can plummet in value in a matter of hours – but the cooling-off deadline should mean novice users of exchanges could back out within the set timeframe, if they get cold feet and realise they don’t have money they can afford to lose. This may help reduce the pile-on effect with some coins surging to eye-watering levels spurred on by frantic purchases driven by the FOMO effect.
Although some extra time is being offered for technical changes, the FCA is taking a hard stance on the core new rules, stressing they will still be brought in by the October deadline.
They include ensuring marketing is ‘clear, fair and not misleading’, any adverts are labelled with prominent risk warnings and great care is taken to stop people being inappropriately incentivised to invest. The threat of being punished by an unlimited fine and up to two years in prison, should be a wakeup call to firms tempted to play fast and loose with the law.
It’s clear the FCA recognises the damage that can be done to overall investor confidence when such high-risk investments are bought by people who seem woefully unaware of the risks. However, it knows it’s also walking a tricky tightrope. It recognises these beefed-up safeguards are needed to ensure consumers are more protected from another crypto implosion, but at the same time it doesn’t want to quash innovation in the digital coin and blockchain space.”
