According to recent statements by the FCA, firms marketing crypto to UK consumers will need to introduce a cooling-off period for first time investors from 8 October 2023.

Those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair and not misleading. These rules are set to follow government legislation to bring crypto promotions into the regulator’s remit.

This move comes after research showed that estimated crypto ownership more than doubled from 2021 to 2022, with 10% of the 2,000 people surveyed saying that they own crypto.

Commenting on this, Hargreaves Lansdown head of money and markets, Susannah Streeter, said: “The Financial Conduct Authority has shot out of the traps, harnessed with new powers to regulate digital coins and tokens, and is racing ahead with new rules to give consumers extra protection in the crypto Wild West. The collapse of the once highly popular FTX exchange, which left up to a million people out of pocket, caused shockwaves across the wider financial sector and clearly rattled regulators, prompting them to take action.

“Crypto firms selling to UK consumers were warned back in February that they would need to get ready for regime change, and now the date has been set and the clock is ticking. Relentless warnings about the dangers of pouring money into high-risk investments are clearly not working, and with crypto turning mainstream, the regulator is flexing its newly-found muscles to help police the space.

“Arguably the biggest requirement will mean new customers starting to speculate in crypto will benefit from a 24-hour cooling-off period. Such is the volatile nature of the crypto markets that coins and tokens can plummet in value in a matter of hours – but it means novice users of exchanges could back out within the set timeframe, if they get cold feet and realise they don’t have money they can afford to lose.

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“This may help reduce the pile-on effect with some coins surging to eye-watering levels spurred on by frantic purchases driven by the FOMO effect. The FCA is clearly worried that far too many consumers are gambling away their money, desperate to catch a ride upwards, no matter how risky the journey is. At least 10% of adults have held or currently hold crypto, demonstrating how far the industry’s tentacles stretch.

“These new rules are unlikely to satisfy some MPs who called for crypto to be regulated like gambling, with strict affordability triggers now imposed across betting firms to try and reduce addiction. These rules won’t go as far, but at least now the FCA has run on the pitch with a whistle and the threat of a serious red card if firms don’t meet requirements.

“The FCA’s move comes hot on the heels of the Securities and Exchange Commission in the US taking legal action against Binance and Coinbase this week for operating as unauthorised exchanges and other securities violations. This clampdown has prompted fresh volatility for crypto issued by these exchanges and other popular coins.

“It’s clear the FCA recognises the damage that can be done to overall investor confidence when such high-risk investments are bought by people who seem woefully unaware of the risks. However, it knows it’s also walking a tricky tightrope. It recognises these beefed-up safeguards are needed to ensure consumers are more protected from another FTX style implosion, but at the same time it doesn’t want to quash innovation in the digital coin and blockchain space.”