Several major crypto exchanges are now asking U.K. users to demonstrate knowledge through questionnaires, according to CNBC on Jan. 5.
CNBC said that Coinbase, Crypto.com, and Gemini are among the exchanges requiring this information. Other crypto exchanges, including OKX and Kraken, have also stated that they will require similar information.
Exchange users specifically must identify themselves as a high-net worth investor with a certain level of wealth or income, or as a “restricted investor” that won’t trade more than 10% of their assets. Users who decline to choose one of these categories will not be able to use or trade crypto on the relevant exchanges.
Users must also correctly answer a questionnaire in order to prove that they are knowledgeable about cryptocurrency and the risks surrounding crypto investment. CNBC said that this test includes questions about services offered by each exchange, plus crypto price volatility and regulation. Once again, U.K. users who fail this questionnaire will not be allowed to trade on the relevant exchange.
Though the new process is capable of preventing U.K. users from accessing each service, some crypto exchanges do not expect usership to decline as a result of the strict user requirements. A Crypto.com representative told CNBC that the company “[does] not expect this to impact user activity in the UK.”
Some exchanges, including Coinbase and Kraken, indicate in their support pages that U.K. users can take the test more than once after a waiting period, meaning that failure will not result in a permanent ban.
FCA Marketing Regime Introduced Changes
The new requirements are the result of the U.K. Financial Conduct Authority’s crypto promotion regime, which introduces strict rules for marketing.
Those marketing rules, which were introduced in October 2023, initially caused companies to either arrange approval for their U.K. activities or reduce services offered to U.K. customers. However, it is now clear that the rules will have a direct impact on U.K. crypto investors and their access to the crypto market.
Reports from Chainalysis in October 2023 suggested that the U.K. was the third-largest crypto economy in the world in terms of raw transaction volume. It found that U.K. wallets received $252 billion in crypto over one year. Though Chainalysis suggested that U.K crypto activity “has not been dampened” by early regulatory changes, it is yet to be seen whether the new user-targeted questionnaires will affect activity.