The UK's Financial Conduct Authority (FCA) has shed light on common issues plaguing crypto asset promotions. Since the implementation of new regulations on 8 October, the FCA has been actively monitoring firms and has identified several areas of concern, including misleading claims and inadequate risk warnings.
FCA Lists Key Issues in Crypto Marketing
The FCA haspinpointed three major problems in the marketing of cryptoassets. First of all, promotions often tout the "safety," "security" and "ease" of using crypto services without adequately addressing associated risks. Secondly, risk warnings are frequently obscured by small fonts or non-prominent positioning. Lastly, firms are not providing sufficient information on the specific risks tied to the products they are promoting.
#FCA warns about common issues with #crypto #marketing @TheFCA pic.twitter.com/IHRkjkgjxh
— Damian Chmiel (@ChmielDk) October 25, 2023
Therefore, the FCA expects companies that approve financial promotions for crypto firms to adhere strictly to regulatory guidelines. Failure to do so will result in actions such as restrictions being placed on the offending firm. For example, the FCA has already imposed restrictions on a firm for not meeting the required standards in approving crypto asset promotions.
The FCA is not working in isolation. It is collaborating with businesses like social media platforms, app stores, and search engines to remove or block illegal promotions. Payments firms also limit UK consumer exposure to companies issuing unlawful promotions. As a result, these businesses are urged to heed the alerts issued by the FCA and contribute to safeguarding UK consumers.
“We are also continuing to identify and act against firms that are illegally promoting cryptoassets to UK consumers. Since the regime went live, we have issued 221 alerts. This list will be continually updated as we identify firms which may be illegally communicating crypto asset promotions and are failing to engage with us constructively,” the FCA commented in the official statement. On the first day after the regulations took effect, the FCA issued over 140 alerts.
Even with the new rules, the FCA emphasized that cryptoassets remain a high-risk and largely unregulated sector. Consequently, consumers should be prepared for the possibility of losing all their money.
FCA’s New Crypto Regulations
Since 8 October, companies aiming to advertise crypto assets in the UK are legally required to obtain authorization or registration from the FCA. Alternatively, their marketing materials must be approved by a firm that is already authorized. According to FCA guidelines, such promotions should be transparent, equitable, and devoid of misleading information.
All cryptocurrency exchanges are required to comply with the new financial promotions regime created by the U.K. Financial Conduct Authority ("FCA").Accordingly, OKX will be updating its APP and Website to reflect the required changes. One of those changes is that OKX will be…
— OKX Help Desk (@OKXHelpDesk) October 9, 2023
They must also feature conspicuous risk warnings and should not unduly encourage individuals to invest. This regulatory shift aligns crypto assets with other types of high-risk investment options. The rules apply to all firms targeting UK consumers, regardless of their geographical location. Firms that fail to comply will face robust action, including removing illegal content.
Since February, the FCA has been alerting firms to prepare for these changes and has laid out its core commitments for the 2023/2024 Business Plan, which aims to promote competition and positive change while reducing and preventing serious harm.
Furthermore, the FCA disclosed statistics concerning financial promotions for the quarter running from April to June 2023. Due to regulatory interventions, the data revealed that 1,507 promotional campaigns were either modified or pulled by firms under the FCA's supervision.
The agency also issued 400 warnings to companies and individuals conducting business in the UK without the necessary approvals. Of these warnings, 11% were alerts related to companies impersonating legitimate businesses.
This article was written by Damian Chmiel at www.financemagnates.com.
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