The FCA is to introduce tougher rules on cryptoasset marketing from October with a new ‘cooling off’ period added for first-time investors.

The new rules are part of a drive by the regulator to stop inexperienced investors losing large sums by investing in cryptoassets they do not understand.

The new 24 hour cooling off period will affect first time investors from 8 October, under new advertising rules from the watchdog announced today.

First time investors will be allowed to change their minds within the first 24 hours and get their money back.

As part of a package of cryptoasset marketing restrictions ‘refer a friend’ bonuses will also be banned.  

The FCA says the new rules mean crypto firms must ensure that people have the “appropriate knowledge and experience” to invest in crypto.

Firms promoting crypto must also put in place “clear risk warnings” and ensure adverts are “clear, fair and not misleading.”   

The new rules follow a government decision to bring crypto promotions within the FCA’s remit.  

Sheldon Mills, executive director, consumers and competition at the FCA, said: "It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.  

“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.” 

FCA research shows that estimated crypto ownership has more than doubled from 2021 to 2022, with 10% of 2,000 people surveyed stating that they own crypto.  

The regulator says that its approach taken to the promotion of crypto is consistent with the rules it added last year to tackle misleading financial advertisements of high-risk investments. It also supports the FCA’s three core commitments laid out in the 2023/24 business plan to reduce and prevent serious harm, set and test higher standards and promote competition and positive change.   

The FCA is also consulting on additional guidance setting out expectations of firms advertising crypto to UK consumers. 

The FCA’s move has been broadly welcomed but some bodies are concerned about the risk of giving too much legitimacy to high risk investments.

Wealth management trade body PIMFA has raised concerns about the proposal, specifically the classification of crypto as Restricted Mass Marketed Investments (RMMI).

David Ostojitsch, director of government relations and policy at PIMFA, said: “While it is right that the Financial Conduct Authority (FCA) has sought to provide clarity around how crypto-assets are marketed - and where they fit in the financial promotions regime - we do have serious concerns around their classification as Restricted Mass Marketed Investments (RMMI).

“Classifying crypto-assets in such a way runs the risk of creating a ‘halo effect’ that may benefit some associated digital assets, leading consumers to assume they are safe assets to invest in or are covered by some form of redress if consumers lose money. Neither is true.”

Rio Stedford, Financial Planning expert at Quilter, said: “Given the extremely high level of risk associated with crypto assets, today’s announcement from the FCA brings some welcome reassurance that those who do not understand these risks but are lured in regardless will be better protected, helping to prevent consumer harm.

“While some have made money through cryptocurrency, and there is nothing wrong with that, those investing are taking a real gamble with their money as they run the risk of losing everything.”

• CP22/2: Strengthening our financial promotion rules for high-risk investments, including cryptoassets.