FCA Grants Extra Time to Crypto Firms Struggling to Adhere to Impending New Rules

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UK companies marketing cryptocurrencies will need to introduce new rules to protect UK consumers by October 08, but the FCA has announced it will give some companies extra time to implement the required changes.

Crypto firms will be required to apply for an extension, meaning they may not need to immediately bring in measures like a 24-hour cooling-off period for first-time investors but can wait until January.

"The Financial Conduct Authority shot out of the traps, harnessed with new powers and raced ahead with new rules to give consumers extra protection in the crypto Wild West," says Susannah Streeter, head of money and markets, Hargreaves Lansdown. "But it’s now recognised some crypto firms will struggle with the deadline which is fast approaching."

The FCA's new rules follow government legislation to bring crypto promotions into the regulator's remit.

The core new rules will still be introduced in October and the FCA has warned that those who breach them could be punished with an unlimited fine and up to 2 years in prison.

Crypto firms selling to UK consumers were warned back in February they would need to get ready for a regime change in regulation.

New measures include a 24-hour cooling-off period for new customers, with a deadline rolled back to January for those firms who apply to delay the implementation.

"Such is the volatile nature of the crypto markets that coins and tokens can plummet in value in a matter of hours – but the cooling-off deadline should mean 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," says Streeter.

She adds that 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.

"Although some extra time is being offered for technical changes, the FCA is taking a hard stance on the core new rules, stressing they will still be brought in by the October deadline," she adds.

Lucy Castledine, Director of Consumer Investments at the FCA says from this October, crypto firms must market to UK consumers clearly, fairly and honestly. And they must provide risk warnings people understand.

"As a proportionate regulator, we’re giving firms that apply a little more time to get the other reforms requiring technology and business change right. We'll maintain our close eye on firms during this extended implementation period," says Castledine.

Streeter explains that the threat of being punished by an unlimited fine and up to two years in prison should be a wake-up call to firms tempted to play fast and loose with the law.

"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 crypto implosion, but at the same time it doesn’t want to quash innovation in the digital coin and blockchain space," she says.