A compliance review by the U.K.’s Financial Conduct Authority (FCA) finds that crypto firms need to step up their efforts to meet new investor protection requirements.

In October 2023, the FCA adopted new rules designed to enhance investor safeguards, with measures such as personalized risk warnings, cooling off periods for crypto buyers and requirements to categorize clients, among other things.

The new requirements represent the first conduct regulation that many crypto firms have had to comply with in the U.K., the regulator noted in a report detailing its findings from an initial compliance review.

“These rules are important for preventing harm to consumers,” the report said. “They help ensure that consumers understand the risks of purchasing crypto, and can absorb potential losses, before they decide to invest.”

Yet, the regulator’s review of firms’ initial compliance with the new rules found “multiple instances” where firms weren’t meeting the new standards nor ensuring adequate consumer protection, the FCA said.

In these kinds of cases, “we have worked extensively with firms to remedy their compliance failures,” it said.

At the same time, “more work needs to be done to improve compliance,” the regulator said, and some firms still need “significant improvements” to reach the levels of compliance that prevail in other financial industry sectors.

The FCA also said that, given the prevalence of poor practices in the crypto sector, firms should not be looking to benchmark their own compliance against other firms in the industry.

“Instead, we expect firms to engage with us directly to drive up standards across the sector,” it said.

The regulator’s report provides added guidance to the crypto sector on complying with the new requirements, including examples of good practices that its review found, and highlighting deficient practices.

The FCA noted that industry firms have also sought greater clarity on its expectations for these rules.

“We want to work collaboratively with the sector to raise standards, and this publication will help firms meet their obligations and support consumers in making informed decisions,” it said.

The regulator also warned it will take further action if it finds that compliance does not improve.