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The Financial Planning Standards Board (FPSB) has recommended that investors take special tests before investing in complex products such as cryptocurrencies.
According to a press release, the FPSB believes that investors should demonstrate at least a minimal level of financial literacy, given that cryptocurrencies are largely unregulated and come with numerous risks. In its recommendation, the supervisory authority refers to the requirement of the International Organization of Securities Commissions (IOSCO).
“If IOSCO members continue to allow self-investment in complex products, the ability of an independent retail investor to access digital trading platforms must require a successful passing of a financial knowledge test to demonstrate a minimum level of financial literacy and ability,” the statement said.
The regulator claims that the development of the crypto industry creates additional risks in addition to fraud. The FPSB calls for providing additional opportunities for investors to receive financial advice before investing in crypto assets. In addition, crypto asset licensing and product regulatory authorities are trying to keep up with the rapidly changing market situation.
The FPSB asks IOSCO to ban the use of credit cards when buying digital currencies. Since social networks play a key role in attracting investors, the regulator calls for restrictions to be imposed on the participation of influential financial persons in the promotion of crypto projects – media personalities in the field of financial technologies had to be qualified as financial advisors.
To prevent financial technology fraud on social media, the FPSB invites IOSCO to work closely with tech firms and punish offenders for defrauding investors. These proposals are part of IOSCO’s desire to put in place a single global mechanism for regulating cryptocurrencies in the face of increased investment.
FPSB’s concern is not unfounded. According to the Bank of Canada, most of the Canadians investing in bitcoin do not have the proper level of financial literacy.
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