New UK rules are “making progress” in rooting out the worst excesses of cryptocurrency investment promotions, marketing experts and participants said, after regulators issued 146 alerts about bad practice on the first full day of regulation .
The Financial Conduct Authority issued the alertswarning consumers about companies offering cryptocurrency assets without regulatory authorization, after the industry came under the organization's regulatory oversight on October 8.
The FCA took tough action despite pressure from a minister. reported by the Financial Times — that the organization be lenient with companies that had not been able to comply in time with all the demands of the new regulatory regime.
The regulator estimated this year that 4.97 million British adults held at least some crypto assets by August 2022. The FCA said when it announced the new rules that many investors regretted "having made a hasty decision" to invest in cryptocurrencies and that it was introducing “adequate risk warnings” to make an informed decision.
"Consumers still need to be aware that cryptocurrencies remain largely unregulated and high risk," Sheldon Mills, the FCA's executive director of consumer and competition, said in June.
This week, James Daley, managing director of Fairer Finance, a consultancy that promotes better treatment for consumers of financial services, said it was a "good time" to implement some "proper regulation" of the sector.
"At least now its trading is regulated and that means the FCA has been issuing warnings and making sure the misinformation stops," Daley said.
Laith Khalaf, head of investment analysis at AJ Bell, the investment platform, said the FCA was definitely “making progress” in regulating cryptocurrencies. He said that while the majority of UK investors had invested small amounts in the class and considered it a high-risk bet, there was a significant minority who had invested "too much money" in the new coins, based on "too little expectations." realistic."
"I think it's probably those people who will hopefully benefit to some extent from better regulation," Khalaf said.
The FCA's decision to regulate the marketing of cryptocurrency investments has been controversial. Some skeptics doubt that the coins, whose value is based on the operation of computer-based blockchain technology, have reliable long-term value.
Critics have suggested that treating them as regulated investments risks creating a “halo effect” that makes investors take them seriously, due to apparent approval from regulators. Chris Randell, former chairman of the FCA, told the Financial Times this month that the fraud was "a feature, not a bug" of much of the cryptocurrency sector.
Other observers have suggested that subjecting assets to strict FCA regulation risks stifling useful innovation. City minister Andrew Griffith wrote to the FCA on October 5, just before the introduction of the new rules, saying that market participants had expressed concerns to him about the harshness of the rules and calling on the regulator to show "tolerance" when the rules came into effect. .
Daley insisted that regulation was vital. “It would be quite difficult to eliminate cryptocurrencies completely, so if we see the advantages of this technology, it is better to try to take advantage of it and regulate it safely,” he said.
The FCA said it had “engaged extensively” with the crypto asset industry in the UK and abroad to help market participants prepare for the new rules, which cover how assets are promoted to consumers. It also offered participants "flexibility" to implement parts of the rules that required "further technical development," he said.
But he added: "When companies don't follow our rules, we will take action to remove illegal content and protect consumers."
Some cryptocurrency investment platforms have welcomed the stricter rules. moon saying In October it announced a pause on sign-ups for new UK clients and a test for existing clients to ensure they understood the risks of their investment.
He welcomed the new rules as an “important step for the crypto industry.”
“Regulations help protect your cryptocurrencies by raising standards in the industry and stopping bad actors,” Luno told clients.
Michael Johnson, head of compliance at Zumo, another crypto investment platform, said the “right regulatory regime, implemented at the right pace” would be “critical” for the UK to realize its potential as a global hub for crypto technologies.
However, SNP MP Martin Docherty-Hughes, the party's former spokesperson on blockchain technologies, said that while the sector needed a robust regulatory regime, the FCA was not well equipped to provide it.
"They are like other public sector bodies, who are at the end of their rope," said Docherty-Hughes, MP for West Dunbartonshire. "More investment and more people are required in the FCA."
