Crypto ownership more than doubled in the UK in the past year, the Financial Conduct Authority said on Wednesday, as it announced an October start date for its crackdown on mis-selling in an industry often dubbed the 'Wild West'. finance.
Almost one in 10 people surveyed by the UK's top financial regulator owned cryptocurrencies in 2022, more than double the number a year earlier, despite warnings from regulators that crypto investors should be prepared to lose all of their expenses.
“It's up to people to decide if they buy crypto. . . Our rules give people the time and the right risk warnings to make an informed choice,” said Sheldon Mills, head of consumer and competition at The FCA added that its crackdown on crypto group advertising would begin on October 8.
The regulator's update comes in a deadly week for the crypto industry after two of its biggest exchanges, Binance and Coinbase, were sued by the U.S. Securities and Exchange Commission for alleged breaches of the securities law.
Over the past few months, the UK has proposed a sweeping new regulatory regime for crypto where the rules governing the industry will be more closely aligned with those of traditional financial services. A cross-party group of MPs recently criticized the policy, suggesting instead that crypto should be overseen as a form of gambling.
Some 36% of 2,000 adults surveyed by the FCA said they had seen or heard crypto advertisements, while 25% of those who had never been involved in crypto became “curious” after being exposed to ad campaigns .
The FCA's crypto marketing regime will require companies to use risk warnings and offer a "24-hour cooling-off period" for customers. Incentives for customers to "refer a friend" will also be prohibited.
The scheme will apply to all crypto-asset businesses marketing to UK customers, whether based in the UK or overseas. “The crypto industry needs to prepare now for this significant change,” Mills said.
Harry Eddis, a solicitor at Linklaters, said the rules would have a "significant impact" on the UK market by making it harder for people to buy cryptocurrency.
The FCA currently regulates crypto businesses for money laundering compliance only. His research found that 28% of those who don't use crypto would be "more likely" to buy it if the market and activity were regulated to a similar standard as traditional financial services.
The rise in crypto asset ownership came despite a tumultuous time for the market, which suffered a crisis of confidence last year that led to the collapse of former industry beacon FTX.
The research also showed that nearly four-fifths of those who bought crypto used their disposable income to fund the purchases, 6% borrowed money, and the rest used savings or earnings from crypto sales.
The average value of their investments was estimated at just under £1,600, with 40% holding less than £100. The most common reason given for buying crypto, as stated by 40% of respondents, was “like a gamble.”
The price of popular cryptocurrency Bitcoin, which peaked at over $64,000 in November 2022, fell almost 3% to $26,484 on Wednesday.
A new crackdown on crypto marketing follows a series of US law enforcement cases this week.
The SEC on Monday filed a lawsuit against Binance, alleging that the world's largest crypto exchange commingled billions of dollars in client cash with a separate trading company owned by its chief executive Changpeng Zhao.
On Tuesday, the SEC sued Coinbase, a rival Nasdaq-listed exchange, alleging it violated US securities law by failing to register as a broker, national securities exchange or clearing agency.