The global professional financial planning body, the Financial Planning Standards Board (FPSB), has recommended that investors pass financial tests before investing in complex products like cryptocurrencies.
In a June 1 press release, the FPSB said investors should exhibit the minimum level of financial literacy given that sectors like cryptocurrencies are largely unregulated with many risks.
The push for the financial test is part of the FPSB’s recommendation to the International Organization of Securities Commissions (IOSCO) for oversight of crypto assets.
“If IOSCO members continue to allow self-directed investments in complex products, the ability of self-directed retail investors to access digital trading platforms should require passing a ‘financial literacy test’ to demonstrate a minimum level of knowledge and financial capability,” the FPSB said.
Regulations struggle to keep up
The body acknowledged that the evolution of cryptocurrencies has exposed investors to greater risk, along with fraud and scams. Additionally, the agency noted that crypto asset licensing and product regulation struggled to keep up with the rapidly changing landscape.
The recommendations also called for more opportunities to offer investors financial advice before venturing into crypto assets. Interestingly, IOSCO members have also been asked to ban the use of credit cards for the purchase of digital currencies.
With social media playing a pivotal role in attracting crypto investors, the FSB is also calling for the enactment of regulations to manage influencers referred to as “fin-influencers.” In this line, the professional order wants fintech influencers to be qualified as financial advisors.
To prevent future fintech scams on social media, IOSCO members have been urged to work closely with tech companies and ban perpetrators for defrauding unsuspecting investors.
The proposals are part of IOSCO’s efforts to lead the enactment of a uniform global cryptocurrency regulatory mechanism amid increased investment.
As previously reported by Finbold, IOSCO Chair Ashley Alder hinted that a global crypto regulator would likely be unveiled as early as next year. The body’s mandate will be to coordinate uniform regulation of the crypto sector.