Britain to curb the marketing of crypto investments

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LONDON, Jan 19 (Reuters) – Britain’s financial watchdog said on Wednesday it planned to curb the marketing of crypto-assets and other high-risk investments, a move that comes amid a boom in crypto ads and celebrity endorsements.

The changes would strengthen risk warnings on advertisements and ban incentives to invest, such as new member or friend referral bonuses, the Financial Conduct Authority (FCA) said.

A surge in investment scams, particularly online and via social media since the start of the coronavirus pandemic in 2020, has prompted the regulator to take action, such as refusing one in five license applications consumer investment firms in the year ended March 2021.

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“We are concerned that too many consumers are just ‘clicking through’ and accessing high-risk investments without understanding the risks involved,” the FCA said.

The planned rules cover high-risk investments such as crypto-assets, including cryptocurrencies such as bitcoin, as well as crowdfunding, peer-to-peer deals, mini-bonds and illiquid speculative securities.

The FCA’s decision comes as interest in digital currencies has grown. Around the world, an increasing number of celebrities have been promoting crypto companies online, which has landed some in trouble.

Reality TV star Kim Kardashian and boxer Floyd Mayweather Jr. are currently facing a US lawsuit alleging the celebrities misled investors in their promotion of a cryptocurrency token. Read more

Spain’s market regulator, meanwhile, reprimanded soccer star Andres Iniesta in November after he promoted cryptocurrency exchange Binance on his Twitter and Instagram accounts. Spain moved this week to regulate crypto advertising, including by social media influencers. read more[readmore[readmore[lirelasuite[readmore

Other prominent figures to promote the emerging technology include actor Matt Damon, who led a campaign to promote digital asset platform Crypto.com. Read more

FCA chart on high-risk investments

“CLEAR, FAIR AND NOT MISLEADING”

The draft rules, out for public consultation, also set the stage for Britain to place crypto-asset promotions under the watchdog’s control for the first time, following an announcement from the Department of Finance. Tuesday.

The watchdog plans to categorize certain crypto-assets as “restricted mass market investments,” meaning consumers can only respond to promotions if they are categorized as restricted, high-net-worth or sophisticated.

“Companies offering such promotions should adhere to FCA rules, such as the requirement to be clear, fair and not misleading,” it said in a statement.

Removing crypto-assets from the reach of ordinary people should go a long way to stem the growing gamified approach to investing, said Pippa Tasker, a partner at law firm CMS.

Retail investors too often follow the advice of influencers on social media without researching the products or their risks, she said.

Under the proposed rules, companies approving and publishing promotions must have relevant experience and understanding of the proposed investments, the FCA said. People looking to make high-risk investments would also face tougher questions about their investment knowledge and experience.

PIMFA, an industry body for financial advisers, welcomed most of the proposals but added there was a role for high-risk investments, which were not necessarily bad although they were risky.

The FCA will set the final rules this summer. The crackdown is part of a wider strategy to strengthen consumer protections, including a proposed consumer duty for businesses.

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Reporting by Huw Jones Additional reporting by Tom Wilso Editing by Iain Withers and Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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