In just the first 24 hours after the Financial Conduct Authority (FCA) put tougher rules in place to make the marketing of cryptoasset products clearer and more accurate, the regulator issued 146 alerts about promotions in the space.
Tough new rules, enforced by the FCA, are designed to make the marketing of cryptoasset products safer for consumers and ban incentives like ‘refer a friend’ bonuses. As of 8 October, firms wishing to promote cryptoassets in the UK must, by law, be authorised or registered by the FCA, or have their marketing approved by an authorised firm.
Under the new FCA rules, promotions must also be clear, fair and not misleading, labelled with prominent risk warnings and must not inappropriately incentivise people to invest. These changes bring cryptoassets in line with other high-risk investments.
The financial promotion regime applies to all firms marketing cryptoassets to UK consumers, regardless of whether the firm is based overseas or the technology used for promotion. The FCA’s rules are designed to help people understand what they are purchasing, and the risks involved.
While over 100 firms were added to the regulator’s warning list on 8 October alone, the FCA explained that it takes “a risk-based approach, so not all firms of potential concern will be added straightaway.”
This list will be continually updated as it identifies firms which may be illegally communicating cryptoasset promotions and are failing to engage with us constructively.
Bringing “greater stability and security to cryptoasset investing”
The FCA also urged people that purchasing cryptoassets remains high-risk and that they should be prepared to lose all their money if they engage with the space. It expects businesses including social media platforms, app stores, search engines, domain name registrars and payment firms to consider the alerts it has issued to ensure UK consumers are protected against illegal promotions.
Nils Bulling, head of digital assets product domain at financial software provider Avaloq, discussed the new rules: “Traditional financial services firms already operate under the FCA’s regime for financial promotions, so their marketing strategies and material are already compliant.
“This experience and institutional knowledge gives wealth managers a competitive edge over crypto native firms, such as exchanges, not only when complying with the FCA’s latest requirements, but also when considering how to build and market cryptoasset investment advice.
“Ultimately, we welcome any rules which bring greater stability and security to cryptoasset investing, while still fostering innovation in the financial sector. We look forward to seeing more wealth management firms disrupt this space and provide safe, compliant access to a greater range of investment opportunities.”