UK FCA Pushing for Tough Regulation on Crypto Promotion

An official publication dated June 7 revealed that the UK’s Financial Conduct Authority (FCA) would implement tough regulations on crypto-related incentives such as advertising. The FCA post demonstrates that the regulators would take a restrictive approach to crypto promotions after implementing the new marketing regulation in the UK.

Citing the provision of the new marketing rules, the regulators noted that crypto would fall under the restricted mass market investment category. Under this category, any crypto assets activity accompanied by an advert must contain a disclaimer alert.

Additionally, all promoted crypto assets are prohibited from giving public incentives such as referral earns and new user bonuses.

Scope of the New Marketing Regulation

Initially, the Financial service and market bill guided the regulatory to implement effective financial strategies for supervising financial-related activities during post-Brexit. Under the new rule, the policymakers integrated some elements of the Financial service and market bill to support the FCA in the amendment of crypto policies.

The new rules allow the FCA team to formulate new regulations accordingly. In 2022 the FCA engaged in public consultation concerning the new rules.

In response, some participants opposed the FCA provision of treating crypto assets as high-risk investments. Also, the respondents protested against the FCA’s restrictive approach to preventing new users from benefiting from promotional offers.

Irrespective of the participant’s responses, the FCA team plans to develop measures for crypto promotions.

Impact of Crypto Promotions 

A few days ago, the FCA team launched a public comment platform to enlighten the crypto-native community on the benefits and risks of crypto advertising. According to the new rules, crypto firms are urged to ensure any crypto promotion activity provides accurate and clear information.

Guided by the new marketing regulations, the crypto firms advertising their digital assets are encouraged to uphold fairness and equality. To comply with the new rules, the FCA has requested crypto firms to research financial and promotional activities extensively.

The proposed study plays a crucial role in ensuring the information displayed in the adverts meets the regulatory requirements.Based on the FCA guidance, stablecoin issuers are encouraged to ensure that the information concerning the stability of digital assets and fiat currency is accurate and reliable.

Beyond this, the FCA guidance outlines other crypto promotional measures that apply to the law. A recent survey conducted by FCA revealed that the number of crypto owners has gradually increased in the UK.

Factors Contributing to High Crypto Adoption

In 2022 the FCA team observed that the number of crypto owners increased to 2000, a 10% increase from 2021. The FCA study demonstrated that the crypto sector would attract approximately 28% of new users after implementing the new rule.

The FCA observed that around four-fifth of investors purchasing crypto utilized their surplus income. Consequently, 6% bought crypto using borrowed funds while the remaining used their savings.

Critics suggest that more people would be willing to buy crypto if the crypto market were regulated as traditional financial markets. The sudden increase in crypto adoption in the UK has obliged the regulators to prioritize amending the financial promotion rules.

Besides the high crypto adoption in the region, the FCA plans to reduce the risk associated with crypto incentives by taking enforcement action. A  subsequent report issued by FCA executive director Sheldon Mill revealed that hasty decisions made by the investors had exposed many to huge losses.

Mill urged investors to make informed decisions before investing in crypto assets. The executive director underscored that the FCA rules give the crypto entrepreneur ample time to do a background check on digital assets before investing.

Also, Mill stated that the FCA had launched a campaign to alert the public on the risk of crypto assets. The executive announced that noncompliance with the marketing regulation would lead to two years of imprisonment or court penalties.

As of October 8, the UK-based crypto firms would be prohibited from engaging in advertisements. Commenting this, the famous legal practitioner Harry Eddis lamented that the new rules would limit consumers from buying crypto assets.

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