The U.K.’s Financial Conduct Authority (FCA) announced on Oct. 25 that numerous crypto firms are falling short of complying with its recently implemented promotion requirements.
The FCA pointed out three common issues with crypto asset financial promotions.
Firstly, some companies are making claims about the safety, security, and ease of use of cryptocurrency services without adequately highlighting the associated risks.
Secondly, warnings provided by some firms are not sufficiently visible, often due to small fonts, hard-to-read colours, or non-prominent positioning.
Lastly, certain companies’ advertisements have outright failed to articulate the risks related to specific promoted products.
The regulatory body emphasised that it would take action against firms failing to meet these requirements.
As evidence, it cited restrictions imposed on rebuildingsociety.com, a company initially set to partner with Binance for its UK services. The FCA has issued 221 alerts to companies violating the new rules, extending its scrutiny to both little-known and prominent crypto firms like HTX and KuCoin.
The new crypto marketing rules, effective from Oct. 8, grant the government authority to impose unlimited fines on companies and prison time on executives. Notably, these rules apply not only to U.K.-based companies but also to those serving U.K. customers from abroad. Several major crypto services, including PayPal, Bybit, Nicehash, and Luno, have withdrawn from the U.K. in response to the stringent regulations.
The FCA is actively collaborating with various platforms and entities such as social media platforms, app stores, search engines, domain name registrars, and payment providers to remove, block, and prevent funds from flowing to banned promotions.
The regulator expects authorised firms to take their regulatory obligations seriously and play a role in safeguarding customers. It plans to regularly update its warning list with firms that illegally communicate crypto asset promotions and fail to engage constructively with regulators.
Despite the U.K. government’s desire, expressed by Prime Minister Rishi Sunak, to establish the country as a global crypto hub, the FCA’s strict regulations are dissuading crypto firms. The FCA issued another warning on Oct. 25, indicating that over 200 firms have received alerts for violating marketing rules since their inception on Oct. 8.
The regulations demand that crypto firms either obtain FCA authorization, partner with an authorised firm, or register with the FCA if operating under specific exemptions. Compliance with clear risk warnings and avoiding misleading incentives in crypto promotions is also mandated.
The FCA urges consumers to consult this list before investing in any crypto assets or services to identify potentially unlawful promotions. The FCA emphasises that crypto assets remain highly risky and largely unregulated, emphasising the limited access to standard financial protections in case of adverse events.
Martin Cheek, managing director of UK digital compliance firm SmartSearch, supported the FCA’s stance. He highlighted that current marketing techniques often overstate the safety and security of crypto assets without adequately outlining the risks.
Cheek emphasised that providing risk information is crucial not just for compliance but also for protecting consumers from uninformed decisions that could expose them to financial crimes.