The Financial Conduct Authority (FCA) of the U.K. is set to implement strict new regulations for crypto advertising once the laws for the industry are finalized. According to documents released Thursday, crypto will be classified as a restricted mass market investment and any advertisements or promotions must include clear risk warnings. Incentives to invest such as refer a friend or new joiner bonuses will be prohibited.
The Financial Services and Markets Bill, which is currently going through Parliament, will give the FCA the power to set rules for the sector in accordance with applicable laws. Despite respondents disagreeing with the FCA’s intention to treat crypto as a high-risk investment and to block new investors from receiving non-real-time promotion offers, the FCA will proceed with these measures.
The FCA has also opened for public comment new guidance to ensure firms clearly understand the implications of this requirement for crypto asset promotions. This guidance states that crypto firms must carry out adequate due diligence and have sufficient evidence of the underlying crypto asset to ensure the financial promotion is fair, clear and not misleading.
The new rules on promotions have been put forward due to the estimated doubling of crypto ownership in the U.K. from 2021 to 2022. Sheldon Mills, executive director of consumers and competition at the FCA, said: “It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.” If firms breach the FCA’s upcoming promotion rules they could face up to two years of imprisonment, a fine or both. Crypto firms will be able to approve their own advertisements starting from Oct. 8.