UK FCA: Crypto investments are risky

The UK’s Financial Conduct Authority (FCA), said it plans to implement a few changes. One is about the caps on individual Bitcoin holdings, while the other regards the way of how risky assets can be marketed.

According to the official document, companies will be obliged to use more blatant warnings of cryptocurrencies being risky investment options. Also, all incentives to invest in crypto, such as referral bonuses, are becoming banned. New guidelines are, for now, limited to marketing of high-risk financial products such as some speculative illiquid assets, and peer‑to‑peer (P2P) platforms. However, even though guidelines don’t apply to cryptocurrency ‘per se’, the FCA warned they are also considered to be very risky.

The FCA asserted people are investing in digital assets without understanding how volatile and, therefore, risky this is – just because “a friend” referred it to them. Therefore, the FCA advised all potential investors, not to put more than 10% in risky assets.

After the recent crash of the crypto market that washed out almost $2 trillion of the market, the regulator said that it is now, more than ever, be assured cryptocurrencies are a very speculative and high risk asset class.

“Consumers should only invest in crypto assets if they understand the risks involved and are prepared to lose all of their money. We expect to take a consistent approach to crypto assets that is taken for other high risk investments,” the report said.

FCA says all directions must be clear and simple

The FCA’s executive director for markets, Sarah Pritchard, said it’s important for 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”.

Recently, however the United Kingdom said it would like to become a global crypto-asset hub. It will be interesting to see how the development of the FCA’s regulation heightens or hinders the crypto industry in the United Kingdom.

The FCA added it “looks forward” to the direction given by the authorities of how crypto marketing should look and that the “qualifying of cryptoassets” rules would follow after the legislation is complete.

Pritchard added that all the risk warnings must be easy to follow and written in simple language so all can understand them.

“Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act,” she added.