The UK’s Financial Conduct Authority (FCA) is gearing up to implement stringent new regulations pertaining to crypto advertising once the relevant laws have been finalized. According to recently published documents, cryptocurrencies will be categorized as “restricted mass market investments.” This classification mandates that advertising and promotional material must feature “clear risk warnings” and prohibits incentives such as “refer a friend” schemes or “new joiner bonuses.”
Once the Financial Services and Markets Bill passes through Parliament, crypto will be incorporated within the scope of UK-regulated financial activities. This legislation forms the basis of the country’s post-Brexit financial strategy and empowers the FCA to establish rules for the sector in compliance with applicable laws.
When the FCA sought feedback on these proposed regulations last year, the majority of respondents expressed their disagreement with plans to label crypto as a high-risk investment and to prevent new investors from receiving non-real-time promotion offers. Nevertheless, the FCA will forge ahead with these measures.
In addition to the forthcoming rules, the FCA has invited public input on new guidelines aimed at ensuring “firms clearly understand the implications of this requirement for crypto asset promotions.” The proposed advice stipulates that crypto companies must conduct “adequate due diligence” and possess “sufficient evidence of the underlying crypto asset” to guarantee that financial promotions are fair, clear, and not misleading.
Moreover, when promoting stablecoin companies, these firms must verify that any claims regarding stability or connections to fiat currency do not contain misleading information. The guidelines also outline several other requirements.
These more assertive promotion rules have been proposed in light of a recent FCA report that revealed a doubling of crypto ownership in the UK between 2021 and 2022. According to the study, approximately 10% of 2,000 surveyed individuals indicated that they owned crypto. The FCA has pursued this strategy as part of its mission to reduce and prevent serious harm, as stated in a press release.
Sheldon Mills, executive director of consumers and competition at the FCA, remarked in the same press release, “It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.” If found in violation of the FCA’s promotion regulations, firms could face up to two years in prison, a fine, or both.
Starting October 8, crypto companies will be able to approve their own advertisements, as outlined in the document.
Source: Coindesk
