The FCA, the regulatory authority overseeing the financial sector in the UK, has expressed its recommendation that cryptocurrency companies avoid utilizing language such as “inflation resistant” while promoting their digital assets. Industry participants are in agreement, acknowledging the potential for misleading consumers.
The members of the U.K.’s digital asset industry appear to be in favor of a proposal put forth by the nation’s financial regulator, which advocates for a shift away from marketing cryptocurrencies as a safeguard against inflation.
For a significant period of time, the industry has propagated the belief that cryptocurrencies with limited supply, such as bitcoin, can retain their worth amidst inflationary pressures, much like traditional assets such as gold or bonds. However, within the U.K.’s digital asset sphere, there is considerable backing for a proposal from the country’s financial regulator that advocates for a departure from promoting cryptocurrencies as a means to hedge against inflation.
According to industry observers interviewed by CoinDesk, the prevailing argument that cryptocurrencies with limited supply, such as bitcoin (BTC), can serve as a reliable hedge against inflation may have theoretical merit. However, the lack of comprehensive data and the inherent volatility of crypto assets can potentially mislead investors,industry observers told CoinDesk.
The FCA’s tough rules to govern crypto promotional material in the U.K., issued on Thursday, include a ban on free non-fungible token (NFT) giveaways and airdrops. In guidance accompanying the rules, the regulator took aim at stablecoin issuers, saying firms should be able to “demonstrate claims of stability or links to a fiat currency” are legitimate.
“We also expect firms to consider the potential harm to consumers and be confident that any claims made by the issuer are genuine,” the guidance said. “Firms should not use terms that could mislead consumers, such as ‘inflation resistant.’”
The FCA, an independent financial regulatory body in the United Kingdom, operates autonomously from the UK government and funds its operations through fees levied on members of the financial services industry. With a focus on consumer protection, the FCA oversees and regulates financial firms offering services to individuals while also upholding the integrity of the country’s financial markets.