The UK Financial Conduct Authority (FCA) is set to implement new rules, effective from October 8, which will affect the promotion of cryptocurrencies, including non-fungible tokens (NFTs) and crypto airdrops. These regulations categorize crypto as a “restricted mass market investment” and mandate clear risk warnings on crypto advertising. Moreover, incentives to invest in cryptocurrencies for the general public will be banned.
Crypto airdrops and NFTs, often used by companies and celebrities as promotional tools, have been tied to various projects’ blockchains or represent real-world assets. However, the FCA’s director of payments and digital assets, Matthew Long, argues that using these promotional tactics could lead to consumers buying crypto that might ultimately become problematic.
Notably, only the promotions involving crypto airdrops and NFTs will be prohibited, not the airdrops or NFTs themselves. Although there was some disagreement in responses to the FCA’s consultation on its marketing rules in 2021, Long clarified that the FCA believes the decided rules provide the “safest possible set of rules.”
Currently, as there is no regime allowing the FCA to fully authorize crypto firms, a temporary exemption has been made for registered crypto companies to approve their ads starting in October while complying with anti-money laundering requirements. However, only FCA-authorized entities will ultimately be allowed to approve advertisements, a move that some industry insiders, like Su Carpenter, director of operations at CryptoUK, feel may be too restrictive.
Despite potential pushback, the FCA remains committed to implementing these proposed measures. Some legal professionals welcome the regulatory changes as necessary for consumer protection. Will Charlesworth, a crypto assets partner at UK-based Keystone Law, stated that these updates would “enhance consumer and market confidence in the digital assets sphere.”
Since January 2020, the FCA has received 318 crypto applications for registration, with only 41 crypto firms successfully completing the process so far. The regulator has faced criticism for its lengthy registration regime. In response, Long emphasizes the necessity of high standards to ensure the safety of custody and prevention of money laundering.
Recently, the UK closed a consultation on new rules for the crypto sector and proposed a new authorization regime for all crypto firms to be overseen by the FCA. Long maintains that the FCA’s primary focus is on six key areas, including addressing fraud and cross-border risk, as outlined in a recent report published by the international securities regulator IOSCO.
Source: Coindesk
