Crypto firms in the UK have breached the country’s newly established crypto marketing rules about 221 times, said the Financial Conduct Authority (FCA) in a Wednesday statement.
The legislation that has been effective from 8 October placed crypto asset promotions under the jurisdiction of the FCA. It is aimed at providing consumers with accurate information and risk warnings, calling for promotions to be clear, fair, not misleading, and with prominent risk warnings.
In a statement that was released on 25 October, the authority highlighted crypto firms’ failure of adhering to the eight crypto promotion rules. It has identified three prevalent problems in crypto asset promotions.
As listed out by the FCA, these promotions often claim ‘safety’, ‘security’, or simplicity in using crypto asset services without emphasising the risks. These risk warnings are not sufficiently visible too as they often are written in small fonts, difficult-to-read colours, or positioned where they aren’t prominent. Companies also fail to supply customers with sufficient information on the risks related to specific products being advertised.
The regulator has been issuing warnings since February of the current year, preparing firms for these changes and recently reiterated the compliance deadline. It expects firms approving crypto asset financial promotions to adhere strictly to regulatory obligations.
Non-compliance has led to actions such as restrictions on firms. This was last seen at the start of the month when it added a total of 143 new crypto exchanges to its warning list. It featured some major exchanges, like Huobi-owned HTX and KuCoin.
The list alerted customers of the non-authorised firms that they “should avoid”. If they do otherwise, the person would not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) in case things go wrong.
Firms in the country should either be registered with the FCA or have been granted temporary status to operate in order to “carry out crypto asset activities”. The regulator’s warning list consisted of the ones that breached the new rules in the 24 hours after the new regime went live on 8 October.
Yesterday’s announcement also encouraged consumers to consult the list saying: “Consumers should check the Warning List before making any investment in crypto. The list will help consumers understand where firms’ promotions may be breaking the law and to consider the promotion with the full information available.
Even with the new marketing rules, cryptoassets still remain high-risk and largely unregulated. If something goes wrong, it is unlikely people will have access to consumer protections, so should be prepared to lose all their money.”
The latest announcement revealed how the FCA is collaborating with various businesses like social media platforms, app stores, search engines, domain registrars to eliminate or block illegal promotions. Payment firms are also involved to minimise UK consumer exposure to companies issuing illegal promotions.
Recently, on 10 October, the FCA took intervening action against Binance’s application for financial promotions compliance in the UK. Just a few days back, the crypto exchange had revealed its plans to collaborate with the peer-to-peer lender, Rebuilding Society, in a bid to ensure compliance with the UK’s new financial promotions rules.
However, the authority soon imposed restrictions on the firm’s ability to carry out financial promotions for unauthorised cryptocurrency service providers, which includes Binance, stating: “The firm must not approve the content of any financial promotion for a qualifying crypto asset for communication by an unauthorised person…… We expect authorised firms approving the financial promotions of crypto asset firms to take their regulatory obligations seriously. Where this is not happening, we will take action.”
