In early October, the United Kingdom implemented new rules governing the promotion of cryptocurrencies. However, these regulations have faced numerous challenges as firms continue to breach them. The Financial Conduct Authority (FCA) of the UK revealed that there have been at least 221 breaches since the rules came into effect on October 8. The FCA’s concerns primarily revolve around the lack of visible risk warnings and insufficient information about the risks associated with crypto investments in these promotions.
FCA cites a lack of information about the risks of products
Additionally, firms have been found to make claims about the safety, security, or ease of using cryptocurrencies without adequately highlighting the potential risks involved. The FCA’s vigilant monitoring of these breaches started almost immediately after the rules were introduced. On October 9, the FCA issued 146 alerts on violations within the first 24 hours of the rules being enforced. While some of these alerts targeted illegitimate schemes promising high returns on crypto investments, legitimate businesses have also faced repercussions.
Rebuildingsociety, a firm that partnered with Binance to comply with the FCA’s new marketing rules, had restrictions placed on it by the regulatory authority. As a result, Binance had to stop onboarding new users in the UK. The FCA has sent a clear message about the importance of regulatory compliance in the crypto advertising space. In one of its statements, it emphasized that authorized firms involved in approving financial promotions of crypto asset firms should take their regulatory obligations seriously. Failure to do so will result in regulatory action.
Regulations and the path to consumer protection
Furthermore, the FCA is actively collaborating with various stakeholders, including social media platforms, app stores, search engines, domain name registrars, and payment providers, to prevent banned promotions and block the flow of funds to them. The new rules aim to bring greater transparency and consumer protection to the cryptocurrency advertising landscape. Under these regulations, only FCA-authorized or regulated firms are permitted to promote or approve crypto-related ads. This requirement extends to all businesses, even those without a physical presence in the UK.
Promotions must prominently feature risk warnings and must not incentivize individuals to invest in cryptocurrencies. Moreover, certain common practices seen in overseas crypto markets, such as referral bonuses and the use of memes for promotional purposes, are banned or restricted within the UK. Despite the challenges presented by these regulations, some experts believe that they will ultimately benefit consumers and contribute to increased adoption of cryptocurrencies.
James Young, the Head of Compliance at Transak, has described the FCA’s regulatory regime as “very challenging” for businesses to implement. However, he is optimistic that the enhanced consumer protection measures will drive cryptocurrency adoption on an exponential scale. The UK’s experience with crypto advertising regulations reflects the broader global trend of regulators seeking to establish clear guidelines for the cryptocurrency industry. As cryptocurrencies become more mainstream, governments and regulatory bodies are striving to strike a balance between fostering innovation and protecting consumers.