The leading financial watchdog in the United Kingdom is pushing for a new wave of cryptocurrency legislation.
The new law will introduce a cap on the amount traders can invest in virtual currencies.
Only a few months ago, a high-ranking government official announced that the UK was on course to be a central crypto hub.
Crypto enthusiasts in the UK are bracing themselves for sweeping legislation that could turn the tide for the industry. The Financial Conduct Authority (FCA) is leading the charge to protect the investors.
Ban on referral bonuses
In a policy document released on Monday, the FCA has announced its intention to limit the amount individuals can invest in the cryptocurrency markets to 10% of net assets. The regulator also disclosed that bonuses to customers of crypto services for referring a friend would be banned.
Crypto exchanges have employed referral bonuses to increase their customer base while users have actively participated in the offers to rack up benefits like reducing trading fees. The proposed move by the FCA is designed to protect investors from wild swings in cryptocurrency prices.
“We want people to be able to invest with confidence, understand the risks involved and get the investments that are right for them which reflect their appetite for risk,” said Sarah Pritchard, FCA’s head of markets. “When we see products being marketed that don’t contain the right risk warnings or are unclear, unfair, or misleading, we will act.”
The FCA does not have powers to make laws for the crypto industry and will rely on Parliament to pass laws based on its recommendations. Part of the regulator’s recommendations is that crypto service providers issue “clearer and more prominent” warnings to intending buyers of the risks associated with speculative crypto trading.
The FCA’s new stance stands in contrast to former Finance Minister Rishi Sunak that the government had plans to make the UK a crypto asset hub. Three Arrows Capital’s default on its loans and the wider carnage faced by the industry in the last few months have triggered renewed interest from regulators globally.
Other regulators in the UK are picking up the pace
The UK’s Advertising Standards Authority is toeing the same path as the FCA in sterner control over the crypto markets. Back in March, the ASA issued warnings to over seven digital assets firms over ads that failed to warn investors of inherent risks.
Going forward, all advertisers “must clearly state that crypto assets are not regulated by the FCA.” Technical jargon should be eliminated from crypto ads and include all material information.