Consumers should be warned that they could lose all their money if they invest in crypto assets, the FCA warned on Monday. As it prepares to extend its powers to cover digital assets, including cryptocurrencies, the financial-services regulator said it will ban bonuses for referring friends.
Rishi Sunak, then the country’s finance minister, announced that the country aimed to become a crypto assets hub in April. As a result of the recent market crash, which saw the price of bitcoin (BTC) fall and assets like the terraUSD (UST) algorithmic stablecoin and hedge fund Three Arrows Capital collapse, the regulator is more determined than ever to enforce its regulations.
Although it lacks current powers to directly regulate the market, the FCA still considers crypto assets to be high risk when used as speculative investments.
Under the plans, potential crypto buyers must be given a “clearer and more prominent” warning that they could lose all their money and won’t be protected if something goes wrong. While the new rules in principle apply only to risky non-crypto products, the FCA is waiting for lawmakers to pass promised legislation that would extend them to innovative digital assets.
The regulator has tentatively said crypto would fall under an intermediate category of “restricted mass-market investments.” Marketing to retail investors wouldn’t be banned, but there are more limits than would apply to assets deemed safer, such as listed stocks.
Qualifying crypto assets “are only likely to be appropriate for consumers as a small part of a diversified portfolio,” and “should only be accessed when consumers understand the risks involved,” the document said, adding that exposure should be limited to 10% of net assets.
Sunak resigned in July, and is now vying with Foreign Secretary Liz Truss to succeed Boris Johnson as prime minister.