Crypto firms introduce risk

Crypto.com, Gemini and other cryptocurrency exchanges are warning users in the U.K. that they’ll need to start filling out risk assessments and investment questionnaires aimed at testing their financial knowledge

It comes ahead of tough new rules on the advertising of digital asset products in the country. The firms have told users in Britain that, starting Monday, they will be required to complete a declaration about what type of investor they are, and respond to a questionnaire on a range of aspects of financial services and regulation to continue using their respective platforms.

In the customer declaration section, users are asked to select their investor profile: either a high net worth individual earning above £100,000 (roughly $126,700) annually or with a net worth of more than £250,000, or a “restricted investor” who won’t invest more than 10% of their assets. Otherwise, they cannot trade crypto. The financial questionnaires, which vary from exchange to exchange, require users to respond to numerous queries about what range of products the firms offer, the volatile nature of crypto asset prices and the treatment of crypto as a product by financial regulators.

If a customer fails to complete the tasks successfully, they will be prevented from trading with their crypto account. Since the passing of the Financial Services and Markets Act, a major package of financial services reforms in the U.K., firms that offer crypto and a certain type of digital currency called stablecoins are now covered by the law and must adhere to the same rules as those that govern traditional financial services.

Since Oct. 8, firms seeking to promote cryptoassets in the U.K. to retail customers must be authorized or registered with the country’s Financial Conduct Authority, or have their marketing approved by an FCA-authorized firm. Coinbase said the changes were made “to ensure we are meeting UK investor protection standards, which require our users to have the necessary knowledge to make informed investment decisions.”

Some crypto companies have suspended their services in the U.K. in response to the new rules. ByBit, an unregistered crypto firm, stopped services to U.K. customers, while Luno said it is halting some U.K. clients from making crypto investments. PayPal, meanwhile, said it is suspending some cryptocurrency services until it brings its crypto arm into compliance with the new rules.

Binance, which was slapped by U.S. authorities with a $4.3 billion settlement over money laundering charges last year, tried in October to get its marketing authorized in the U.K. with a third-party firm. But it was blocked by the FCA, which at the time said it was doing so to protect consumers.