UK crypto investors should restrict holdings, according to financial regulator

 The U.K. Financial Conduct Authority stated in a policy document released on Monday that investments in crypto assets should be limited and that consumers should be informed that they risk losing all of their money.

As it gets ready for new regulations that will expand its authority to cover digital assets like cryptocurrency, the financial services regulator announced a restriction on giving bonuses to customers who suggest friends.

Former Finance Minister Rishi Sunak said in April that he wants to turn the nation into a hub for crypto assets. However, the recent market collapse, which saw the price of bitcoin (BTC) decline and the demise of assets like the terraUSD (UST) algorithmic stablecoin and hedge fund Three Arrows Capital, has further strengthened the regulator's will to take action against what it views as illegal.

In a statement, Sarah Pritchard, the FCA's executive director of markets, said, "We want individuals to be able to invest with confidence, understand the risks involved, and acquire the products that are suited for them and reflect their appetite for risk."

 

Following a consultation that was released in January, she declared, "Where we observe products being sold that don't have the necessary risk warnings or are imprecise, unfair, or deceptive, we will act."

 

Despite the fact that it now lacks the authority to directly supervise the market, the FCA stated that "we still consider crypto assets, when utilized as a speculative investment, to be high risk."

 

Warning

The plans mandate that prospective cryptocurrency buyers be given a "clearer and more prominent" warning that they risk losing all of their money and won't be covered in the event of a catastrophe. While the FCA is waiting for lawmakers to enact the expected legislation that will expand the new restrictions to cutting-edge digital assets, they currently only apply in theory to risky non-crypto products.

 

According to the regulator, cryptocurrency would fall into a middle category of "restricted mass-market investments." Although marketing to retail investors would not be prohibited, there would be more restrictions than for assets that are seen as safer, such listed stocks.

 

Qualifying crypto assets "should only be accessed when necessary" and "are only likely to be appropriate for consumers as a tiny portion of a diversified portfolio."