New rules and risk assessments for UK Crypto traders
Coinbase and Gemini, for example, are among cryptocurrency exchanges that now require U.K. users to fill out risk assessments. These questionnaires are designed to test their financial knowledge.
The measures are a response to new rules in the UK. The rules require crypto companies to clearly inform users of the risks involved in trading cryptocurrencies. If a customer fails to successfully complete the requests, they will be prevented from trading with their crypto account.
Risk warning
Crypto.com, Coinbase, Gemini and other cryptocurrency exchanges are warning UK users that they’ll need to complete investment questionnaires. Thes are aimed at testing their financial knowledge before being allowed to trade.
The companies have told UK users they are required to complete a declaration about what type of investor they are. Traders are required to respond to a set of questions on financial services to permit use of their platforms.
Clients’ declaration
In the client’s declaration section, users are asked to select their investor profile. A trader is directed to inform the company of their financial status.
Questions such as: are you a high-net-worth customer earning above £100,000 per annum or with a net worth of more than £250,000? Or, are you a ‘restricted investor’ who won’t invest more than 10% of their assets. If clients do not complete the requests, they are prevented from trading crypto related products.
The financial questionnaires, require users to respond to numerous questions about the range of products available. They want the client to fully understand the potential volatility of crypto assets.
Strict rules to protect the retail trader
Since the UK passed the Financial Services and Markets Act, companies that offer crypto assets and certain types of digital currency, known as stablecoins, are now covered by UK law.
These are the same rules as those that govern traditional financial services and are aimed at protecting the retail trader.