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Members of the U.K. digital asset space seem to largely support a proposal by the country’s financial watchdog to move companies away from promoting crypto as an inflation hedge.

The popular argument that limited-supply cryptocurrencies like bitcoin (BTC) can hold firm against rising price levels may be theoretically sound – but due to a lack of data combined with the volatility of crypto assets, it can also mislead investors, industry observers told CoinDesk.

The FCA’s tough rules to govern crypto promotional material in the U.K., issued on Thursday, include a ban on free non-fungible tokens (NFT) giveaways and airdrops. In guidance accompanying the rules, the regulator took aim at stablecoin issuers, saying firms should be able to “demonstrate claims of stability or links to a fiat currency” are legitimate.

“We also expect firms to consider the potential harm to consumers and be confident that any claims made by the issuer are genuine,” the guidance said. “Firms should not use terms that could mislead consumers such as ‘inflation resistant.’”

“To the extent that people bought into crypto during the bull run on the back of rising inflation and then lost money in the subsequent crypto winter, then one could say that the inflation narrative has been harmful,” Shea said, adding that cryptocurrencies are not designed to move one-to-one against inflation. “The inflation narrative is more medium-to-long term and is driven by the expectation [of] the large increase in fiat money supply witnessed over the past several years.”

“In a strict sense, the FCA is correct,” said Ryan Shea, economist at U.K.-based crypto index trading Trakx. “Cryptocurrencies are not inflation-protected in the same way as an index-linked Gilt or an inflation-protected Treasury bond, whose value mechanically increases in line with the specified inflation index.”

But for cryptocurrencies such as bitcoin, that are in fixed or limited supply, there is a strong similarity between their supply metrics and that of gold, for which supply is naturally constrained, Shea said.

Despite its popularity, bitcoin is relatively new, and available price data on the cryptocurrency is still limited, said James Butterfill, head of research at CoinShares.

“Due to bitcoin’s relatively short existence, we have to rely on the fundamental concepts of what it represents as an asset, so theoretically, it being of limited supply while being priced in U.S. dollars, it should act as an inflation hedge,” Butterfill told CoinDesk.

Although crypto could “theoretically be a hedge against inflation,” the lack of data supporting that theory hurts that argument, ratings agency S&P Global said in a statement from May.

As far as investors are concerned, promotions around how bitcoin or other coins could be used to hedge against inflation “are imprecise marketing slogans rather than adequate investment advice,” said Diego Ballon Ossio, partner at Clifford Chance law firm.

“To the extent that people bought into crypto during the bull run on the back of rising inflation and then lost money in the subsequent crypto winter, then one could say that the inflation narrative has been harmful,” Shea said, adding that cryptocurrencies are not designed to move one-to-one against inflation. “The inflation narrative is more medium-to-long term and is driven by the expectation [of] the large increase in fiat money supply witnessed over the past several years.”

Ballon Ossio added that it’s “understandable that the FCA” wants to ban this type of promotion.

“I think the specific reference to ‘inflation resistant’ in this context is simply an example, the general point is that firms must think about their statements and make sure that they do not mislead,” he said.

The FCA’s new rules on crypto marketing will come into effect on Oct. 8.

Edited by Nikhilesh De.