UK Financial Regulator Consults Crypto Sector on Proposed Investment Rules

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The Financial Conduct Authority (FCA) in the United Kingdom has unveiled a series of proposals designed to reshape the domestic investment landscape. In doing so, it has explicitly called for input from the cryptocurrency industry to inform its regulatory approach.

Published on Monday, the regulator’s discussion and consultation papers solicit feedback from crypto firms on plans intended to broaden consumer access to investment products and revise rules concerning client classification and conflict of interest management.

A key point in the discussion paper observed that nearly all underperformance linked to high-frequency trading apps was associated with cryptoassets and contracts for difference. It underscored concerns over consumers accessing high-risk “cryptoasset proxies” that lack standard investor protections like limits, warnings, or suitability assessments.

One significant proposal within the consultation paper states the FCA’s intention to clarify its guidance. It will specify that a personal investment history focused mainly on speculative, high-risk, leveraged products, or cryptoassets does not typically qualify someone as a professional client, unless other robust evidence is presented.

The watchdog asserts these proposed amendments aim to simplify existing rules and are part of a broader strategy to eliminate certain rigid criteria, thereby granting regulated firms greater responsibility in making appropriate client assessments.

Crypto companies and other firms advising on or selling digital assets are requested to submit their responses to these recommendations by deadlines in February and March of the coming year.