UK’s FCA Bans MLM Crypto Schemes Amid Ownership Surge

UK’s FCA Bans MLM Crypto Schemes Amid Ownership Surge

In a move aimed at tightening the reins on the crypto industry, the UK’s Financial Conduct Authority (FCA) has introduced stringent regulations on crypto investment schemes and related promotional activities. This decisive action follows a surge in cryptocurrency ownership within the UK over the past year.

UK FCA Crypto MLM Ban

As part of a comprehensive set of measures designed to ensure potential crypto investors are well aware of the inherent risks, the FCA has also prohibited ‘refer a friend’ bonuses typically offered by crypto firms. Under the new regulations, these companies are required to verify that potential investors possess the necessary knowledge and experience before permitting them to invest in crypto assets.

Crypto promoters are now obliged to provide clear and fair risk warnings, as well as to ensure their advertising content remains transparent and not misleading. This shift in regulation follows governmental legislation intended to bring crypto promotions within the FCA’s regulatory purview.

Sheldon Mills, Executive Director, Consumers and Competition at the FCA, emphasized the high stakes of crypto investment. “Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money,” Mills warned. He also added that the crypto industry needs to prepare for these substantial changes, with additional guidance being prepared by the FCA to assist in compliance.

The implementation of these regulations coincides with recent FCA research that reveals a significant rise in crypto ownership. The research shows that ownership has more than doubled from 2021 to 2022, with 10% of the 2,000 surveyed individuals reporting they own crypto.

These new regulatory measures echo the FCA’s efforts last year to combat misleading financial advertisements for high-risk investments. They align with the FCA’s core commitments laid out in the 2023/24 business plan, aimed at reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change.

In addition to the newly imposed rules, the FCA is also consulting on additional guidance regarding firms advertising crypto to UK consumers. Stakeholders interested in contributing to the consultation process have until 10 August to submit their responses.

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