UK to enforce crypto ‘cooling-off period’ in major crackdown

UK crypto Image credit: Adrian Today via Shutterstock

The UK financial regulator is cracking down on crypto marketing in a major consumer protection overhaul that will introduce a “cooling-off period” for first-time investors.

The new rules, announced by the Financial Conduct Authority (FCA), will also ban “refer a friend” bonuses in cryptoasset marketing.

The rule is designed to ensure UK consumers have enough time to learn about the risks of crypto investments before sinking significant funds into them.

Crypto promoters will also have to put in place clear risk warnings and ensure adverts are not misleading.

The new rules will come into effect from 8 October 2023 and follow government legislation to bring crypto promotions into the FCA’s remit.

“It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice,” said Sheldon Mills, executive director of consumers and competition at the FCA.

“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”

It comes as part of a wider crackdown by the FCA on crypto marketing. Previously, enforcement had fallen under the remit of the Advertising Standards Authority, which banned several crypto promotions by Arsenal Football Club relating to social media posts. The watchdog found that the posts were misleading and failed to illustrate the risks of investing in cryptoassets.

Last month, the Treasury Committee called for consumer cryptocurrency trading to be regulated in the same way as gambling.

MPs have also called for meaningful cryptoasset regulation by 2025, dedicated cryptocurrency units and a “crypto tsar” to ensure the UK can be an early leader in the sector.