UK Financial Regulator tells Crypto Investors to Limit Holdings
Investment in Digital Assets should be capped, with investors warned that they might lose all of their investments, the U.K. Financial Conduct Authority (FCA) said in a policy document published on 1st August.
There will be a prohibition on offering bonuses to customers who refer friends, the financial-services regulatory body said as it formulates new laws that will extend its authority to cover Digital Assets including cryptocurrencies.
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In April, then Finance Minister Rishi Sunak said he wanted to make the country a Cryptocurrency Asset hub. But the recent market slump, which saw a fall in the value of Bitcoin (BTC) and the collapse of Digital Assets such as the terraUSD (UST) algorithmic stablecoin and hedge fund Three Arrows Capital, has made the regulatory body only more determined to act against what it sees as unduly risky business conduct.
FCA is executive director of markets, Sarah Pritchard said that the regulatory body wants retail investors to invest in an asset with confidence, understand all the risks associated with the said asset and determine what investments are right for them depending on their appetite for risk. She further added that if the regulatory body sees products being marketed that do not contain the risk warnings or are ambiguous, the authority will act on it.
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The FCA said that they will consider Cryptocurrency Assets, when used as a speculative investment to be high risk despite its current lack of authority to directly regulate the Cryptocurrency Market.
Under the strategies, potential cryptocurrency buyers must be given a “clearer and more prominent” warning message that they could lose all their money and won’t be protected if something goes south. While the new guidelines in principle apply only to risky non-cryptocurrency products, the FCA is waiting for policymakers to pass promised legislation that would cover them to innovative digital assets.
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The regulatory body has tentatively said Cryptocurrency would fall under an intermediate category of “restricted mass-market investments.” Marketing to retail investors wouldn’t be prohibited, but there are more limits to cryptocurrency investments than would apply to assets deemed safer, such as listed large cap stocks.
Qualifying Cryptocurrency 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 to such assets should be limited to 10% of net assets.
"Rishi Sunak resigned last month, and is now vying with Foreign Secretary Liz Truss to succeed Boris Johnson as UK’s Prime minister."
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