The UK Financial Conduct Authority (FCA) is finalizing regulations concerning the marketing and advertising of cryptocurrencies. They are scheduled to come into effect on October 2023, classifying cryptocurrencies as “restricted mass market investments” and require clear risk warnings on all crypto ads and promotions. The number of crypto holders in the UK has more than doubled in the past year.
The new rules on promotions have been put forward because estimated crypto ownership in the U.K. doubled from 2021 to 2022, with 10% of 2,000 people surveyed by the regulator stating that they own crypto, according to a separate report published by the FCA.
The rules will also prohibit investment incentives such as “refer to a friend” or “new joiner bonuses” schemes. Additionally, there will be a cooling-off period for new investors, meaning consumers cannot proceed with a Direct Offer Financial Promotion (DOFP) without a reconfirmation request at least 24 hours later.
Furthermore, crypto firms must conduct adequate due diligence and possess sufficient evidence of the underlying crypto asset to ensure that their financial promotions are fair, clear, and not misleading. The proposed regulations also stipulate that violations of these rules could result in imprisonment for up to two years.
The FCA’s survey of 2,000 respondents revealed that 40% of them bought cryptocurrencies as a speculative gamble, while approximately 30% regretted their decision to invest in crypto.
Su Carpenter, the Director of Operations at CryptoUK, the trade body for the UK crypto industry, expressed concerns about the proposed regulations. She highlighted that the requirement for all financial promotion approvers to have an understanding of cryptoassets and permission to act as an approver could create overly restrictive barriers and an unbalanced environment. Carpenter believed that the criteria for approver status could limit the number of organizations eligible to fulfill this role.
