The Financial Conduct Authority (FCA), the UK financial regulator, has proposed that corporations cease portraying cryptocurrencies as inflation-resistant. This action has received widespread approval from members of the digital asset business.
A prevalent argument has been that limited supply currencies, like as Bitcoin, can maintain their value in the face of rising inflation. However, experts warn that due to a lack of data and volatile markets, it may mislead customers.
The FCA’s new rules attempt to control cryptocurrency advertising material in the UK. Free Non-Fungible-Tokens (NFT) distributions and drops are prohibited under these regulations. The regulator is also critical of stablecoin issuers. They underline the significance of demonstrating long-term stability or links to fiat currencies.
The FCA’s guidance emphasizes the need for corporations to consider potential customer harm and ensure that any promises made are genuine. Terms like “inflation resistant” should be avoided since they may mislead customers.
💼🇬🇧FCA is right to propose a stop to marketing crypto as ‘Inflation Resistant,’ – #UK Industry Members Say
— Walletor (@walletorapp) June 13, 2023
While cryptocurrencies such as Bitcoin (BTC) have a fixed limited supply, similar to gold in terms of supply metrics, analysts note that they are not inflation-protected. Cryptocurrencies are intended to address medium-to-long-term inflation problems caused by an increase in the supply of fiat money.
Although experts accept that crypto can hedge against inflation, the paucity of evidence weakens the case. Promotions implying cryptocurrency as inflation hedges are viewed as vague marketing buzzwords.
Given the possible risks and lack of evidence, it is logical that the FCA wants to prohibit such advertisements. It underlines the need for companies carefully consider their comments to avoid misleading investors.
Finally, the FCA’s plan to prohibit marketers from portraying cryptocurrencies as inflation-resistant reflects concerns. While cryptocurrencies have supply characteristics similar to gold, their behavior in regard to inflation is complicated. When contemplating cryptocurrencies as a hedge against inflation, investors should proceed with care and obtain reliable investment advice.