An advert for bitcoin
(Picture: REUTERS)The City’s top watchdog is tightening its grip on crypto and other high-risk investments as politicians and regulators fret that too many Brits are getting into investments they don’t understand.
The Financial Conduct Authority today launched a crackdown on financial advertising amid concerns about “the ease and speed with which people can make high-risk investments”.
The regulator wants to ban incentives to invest such as refer-a-friend bonuses or new joiner giveaways. Rules around financial marketing and risk warnings would also be toughened up under the proposed reforms, which will now go to consultation.
The new rules are specifically targeted at companies offering cryptocurrency investments but will also apply to the marketing of other high-risk investments, such as mini-bonds or peer-to-peer loans.
Sarah Pritchard, executive director of markets at the FCA, said: “Too many people are being led to invest in products they don’t understand and which are too risky for them. 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.”
Kat Mann of digital wealth manager Nutmeg said: “The proliferation of advertising of largely unregulated, high-risk investments, such as cryptoassets, has led too many people to invest in products they do not understand or that are not well-placed to meet their goals.
“By requiring firms promoting high-risk investments to adhere to the same rules as FCA regulated businesses, there is an attempt to level the playing field and make it easier for consumers to understand the risks of the choices they have.”
The new rules are understood to not apply to regulated businesses offering investments such as shares or ETFs. Startups such as Freetrade have grown rapidly in part by offering free shares to new customers.
Details of the crackdown come a day after Chancellor Rishi Sunak announced plans to bring crypto marketing under the control of the FCA.
The UK’s Advertising Standards Authority has also launched a crypto crackdown in recent weeks, with a senior exec saying the agency was on “red alert” over the matter.
Lisa Cameron MP, chair of the Crypto and Digital Assets APPG in Parliament, said: “We can’t put crypto back in its box. Consumers are already embracing this sort of technology and are in many ways way ahead of the curve.
“Consumer protection needs to be a key priority to make sure that consumers understand the potential risks. We need clear rules and guidance for the promotion of crypto and digital assets so that consumers are protected and so that crypto firms know what they can and can’t do and don’t fall foul of the rules.”
