Bitfinex is under scrutiny by the regulators in the UK. The Financial Conduct Authority (FCA) raised concerns about the cryptocurrency exchange today (Friday), warning investors of potential risks associated with it. The regulator stated that Bitfinex may be promoting financial services or products without its permission.
"If you deal with this firm, you won't have access to the Financial Ombudsman Service if you have a complaint," the financial watchdog cautioned. "You also won't be protected by the Financial Services Compensation Scheme if things go wrong."
In a publicly-released statement, Bitfinex wrote: "Bitfinex is very disappointed by the action taken by the FCA."
"Over the past four months, Bitfinex has held detailed discussions with the FCA and has proactively taken measures to meet the FCA’s requirements including issuing a notice to all its customers providing detail of all the measures it has taken to meet the FCA’s requirements."
FCA Identifies Critical Crypto Marketing Issues
In the official statement, the FCA highlighted three major issues with the marketing of crypto assets. Firstly, it pointed out that many promotions emphasize the "safety," "security," and "ease" of using crypto services without adequately addressing the associated risks.
This lack of transparency is a cause for concern as it may mislead potential investors. Secondly, risk warnings are often obscured by small fonts or non-prominent positioning, making it easy for consumers to overlook critical information about the risks involved in crypto investments.
In response to these issues, the FCA urged companies that approve financial promotions for crypto firms to strictly adhere to regulatory guidelines. Failure to do so can result in actions such as restrictions being placed on the offending firm. For instance, the FCA has already imposed restrictions on some firms for not meeting the required standards in approving crypto asset promotions.
Bitfinex / https://t.co/YHKH4P6PQA https://t.co/kyKZTJX2ua
— Jared Loptany Kirui (@JaredLopta79285) October 27, 2023
Strict Adherence to Regulatory Guidelines
In September, the FCA issued its final warning in relation to the recently implemented financial promotion rules. This warning, authored by Lucy Castledine, the Director of Consumer Investment, and Matthew Long, the Director of Payments and Digital Assets, emphasized the need for firms to urgently reconsider their position if they believe they will be in breach of the new regulations.
The FCA underlined that the new regulatory regime is not meant to hinder consumer access to existing assets but is aimed at preventing high-risk investment activity and promoting consumer protection.
The financial promotion regime is expansive, encompassing communications made through websites or apps. Most, if not all, crypto asset firms offering services to UK consumers are expected to fall under this new regulation. The regime's core objective is to ensure consumers base their investment decisions on accurate information.
Firms that fail to comply with the new regime face severe consequences, including criminal charges. Penalties may include imprisonment of up to two years, unlimited fines, or both.
"Bitfinex has also blocked a range of website pages to visitors from the UK including the Bitfinex Affiliates pages, Staking pages, Credit / Debit Cards, Lending Pro, Bitfinex Borrow, various ‘How to buy’ pages and the Mobile App information page," Bitfinex added.
"Bitfinex has a strong track-record of working with regulatory authorities and law enforcement agencies globally to combat crime and scams and aid the protection of investors. It is therefore disappointing that its efforts have not been acknowledged in this case."
This article was written by Jared Kirui at www.financemagnates.com.
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