The UK’s Financial Conduct Authority (FCA) published guidance on crypto asset promotions and advertising for the country on Thursday.
This follows FCA’s new regime that took effect in October this year. The regulator has been consulting on the guidance since June.
The new rules classified cryptocurrencies as “restricted mass market investments,” which will require any advertisements or promotions to contain “clear risk warnings”, and bans incentives to invest such as “refer a friend” or “new joiner bonuses”.
The recently released document, titled ‘FG23-3: Finalised non-handbook guidance on Cryptoasset Financial Promotions’ is a product of the consultation on the proposed guidance that was closed on 10 August 2023, and the feedback that was received back then. It stated that it does not impose new obligations but clarifies existing regulatory obligations.
The finalised guidance outlined the context of the crypto asset financial promotion regime, including the legal framework and exemptions. Here, it emphasised the need for promotions to be fair, clear, and not misleading, considering the novel risks associated with crypto assets.
While dealing in this sector, firms are expected to undertake due diligence on the crypto assets they promote and ensure that the information provided is balanced, accurate, and does not omit relevant details.
The guidance covers the rules on communicating past and future performance and the disclosure of costs, fees, and charges. It also called for effective systems and controls to be in place to monitor compliance and amend or withdraw promotions as necessary.
The document also revealed the secondary international competitiveness objective that the FCA now has taken over. This means that it influences the policy for crypto asset financial promotions, aiming to protect consumers and support beneficial innovation.
Last month, the financial regulator had issued a statement bringing light to how crypto firms in the UK have breached the country’s newly established crypto marketing rules about 221 times. It then identified three prevalent problems in crypto asset promotions.
According to the FCA, promotions often claim ‘safety’, ‘security’, or simplicity in using crypto asset services without emphasising the risks. However, 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 FCA has also taken stringent action against firms that have failed to comply with its rules. Early in October, it added a total of 143 new crypto exchanges to its warning list.
Featuring 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.
Following the new regime that went live on 8 October, crypto 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”. It also placed crypto asset promotions under the jurisdiction of the regulator. This move is aimed at providing consumers with accurate information and risk warnings.