As part of a package of measures designed to ensure those who buy crypto understand the risk, ‘refer a friend’ bonuses will also be banned.

Set to come into force in October, the new rules mean crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto. Those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair and not misleading, similar to the rules introduced by the FCA last year to tackle misleading financial advertisements of high-risk investments.

The UK's Advertising Standards Authority has previously banned several crypto firms’ promotions for being misleading and irresponsible. For example, Luno’s out of home billboards told people it’s time to buy bitcoin without a clear risk warning. Meanwhile, Arsenal Football Club’s promotion of its fan token with partner Socios on its website and Facebook was deemed by the ASA to have trivialised investing in crypto.

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

Sheldon Mills, executive director, consumers and competition, says: "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."

In the future, firms promoting crypto products or services will need to include a clear risk warning such as: "Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more."

The new rules come into effect as research from the FCA shows that the estimated crypto ownership has more than doubled from 2021 to 2022, with 10% of the 2,000 people surveyed stating that they own crypto.

Pimfa, the trade association for wealth management, investment services and the personal investment and financial advice industry, has raised concerns about the FCA's classification of crypto investments as Restricted Mass Marketed Investments (RMMI).

David Ostojitsch, director of government relations and policy at Pimfa, comments: “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 covered by some form of redress if consumers lose money. Neither is true.

“Crypto-assets are not regulated, are highly volatile and therefore high risk and should only be invested in by sophisticated investors that understand the risk they are taking, not mass market investors. There is a significant danger here that consumers will assume crypto-assets are safe because they are being marketed by an FCA-regulated person or firm. Again we would stress this is not the case.

“We are also disappointed that given the negative sentiment expressed by the industry to these proposals, the FCA has decided to go ahead with them regardless.”

By way of contrast. lobbying group CryptoUK, feels that the new regime will put the UK at a competitive disadvantage. Su Carpenter, director of operations at CryptoUK, says: “The requirement that all approvers of financial promotions have an understanding of cryptoassets and have permission to act as an approver also has the potential to introduce an overly restrictive regime, based on the incredibly small number of organisations which would meet that criteria for approver status.

“We have concerns that the policy proposed may bring into play disproportionately restrictive barriers and create an unbalanced environment There is a risk that this solution will both unfairly concentrate market power for those firms which are already authorised and potentially encourage unauthorised firms to operate from outside of the UK, creating a competitive disadvantage for UK-based organisations and also potentially undermining consumer safeguards.

“Additionally, in relation to the cooling off period, the principle we agree with, but question the length of the duration being proposed - as this is not aligned with other jurisdictions - and would welcome evidence based findings on the rationale behind this proposal.