The UK's Financial Conduct Authority (FCA) has reported that firms have breached the country's new crypto marketing rules at least 221 times since the rules came into effect on October 8. Firms are failing to provide sufficient risk warnings, disclose adequate information about risks, and are making claims about the safety, security, or ease of using crypto without highlighting associated risks. While some alerts appear to target illegitimate high-yield return schemes, the FCA has also taken action against seemingly legitimate businesses. The FCA is working with various platforms to remove, block, and stop the flow of funds to banned promotions.
The UK's Financial Conduct Authority (FCA) has reported that firms have breached the country's new crypto marketing rules at least 221 times since these rules came into effect on October 8. The rules were designed to enhance consumer protection by regulating how cryptocurrencies and crypto services are marketed and promoted in the UK. The regulator's observations suggest that firms have failed to comply with several aspects of these rules.
The specific breaches include:
Failure to Provide Visible Risk Warnings: Firms are not adequately displaying risk warnings in their promotional materials, which are crucial to inform consumers about the potential risks associated with cryptocurrencies.
Inadequate Information About Risks: The FCA's data indicates that the crypto-promoting companies did not provide sufficient information about the risks involved in cryptocurrency investments.
Misleading Claims About Safety and Security: Some firms made claims about the safety, security, or ease of using cryptocurrencies without properly highlighting the associated risks.
These findings come shortly after the FCA's announcement on October 9 that it had issued 146 alerts regarding violations of the new marketing rules in the 24 hours following the rules' implementation.
It's important to note that not all these breaches appear to involve illegitimate schemes offering high-yield returns on crypto investments. The FCA has also taken action against seemingly legitimate businesses. For example, the FCA placed restrictions on Rebuildingsociety, a firm partnered with Binance to approve its marketing and communications to comply with the FCA's new rules, which ultimately led Binance to halt onboarding new UK users.
The FCA is determined to ensure that its authorized firms approving the financial promotions of cryptoasset firms take their regulatory obligations seriously. The regulatory body is actively working with various stakeholders such as social media platforms, app stores, search engines, domain name registrars, and payment providers to remove, block, and stop the flow of funds to banned promotions.
The new marketing rules apply to all businesses, whether or not they have a UK presence. Cryptocurrency-related advertisements must be promoted or approved by FCA-authorized or regulated firms and must feature prominent risk warnings. These promotions should not incentivize investments in cryptocurrencies, and they should refrain from typical tactics used in overseas markets, such as referral bonuses and memes.
The FCA's approach to regulating crypto advertising is designed to enhance consumer protection and reduce the risk of consumers being misled by deceptive or fraudulent marketing materials. While it may present challenges for businesses to implement, it is ultimately aimed at ensuring greater adoption of cryptocurrencies on an exponential scale.
(JESSE COGHLAN, COINTELEGRAPH, 2023)