UK Financial Conduct Authority Plans To Strengthen Regulations On Crypto Promotions

Key Points:

• UK’s Financial Conduct Authority (FCA) is introducing new social media guidance to combat illegal and non-compliant financial promotions.
• The FCA aims to modernize regulations and address the use of social media in promoting financial products and services.
• The FCA will also collaborate with the Advertising Standards Authority to increase scrutiny over illegal promotions, including those related to cryptocurrencies, and educate consumers about the risks involved.

The UK Financial Conduct Authority (FCA) has announced its intention to enhance regulations surrounding financial promotions on social media platforms.

The proposed guidance aims to modernize the information provided by firms when advertising financial products or services online, taking into account the evolving landscape of social media advertising in the financial industry.

One of the key objectives of the new guidance is to support the FCA’s Consumer Investments Strategy, which aims to reduce the number of retail consumers investing in high-risk investments without appropriate risk tolerance or vulnerability characteristics by 2025.

In addition to addressing illegal and non-compliant financial promotions, the FCA will also focus on curbing promotions by financial influencers that may harm consumers. This includes a particular emphasis on influencers promoting cryptocurrency assets on social media platforms.

To tackle these issues, the FCA plans to collaborate with the Advertising Standards Authority to increase oversight and scrutiny of illegal financial promotions and advertising practices. The regulators also aim to educate both consumers and influencers about the risks associated with promoting financial products.

Starting from October 8, the FCA will implement several measures, including banning incentives for investing in cryptocurrencies such as “refer a friend” bonuses. Firms will be required to provide clear risk warnings and introduce a mandatory 24-hour cooling-off period to allow first-time investors sufficient time to make informed investment decisions.

The FCA’s efforts to regulate online financial promotions have gained momentum due to the rising influence of “finfluencers” and the potential risks associated with online consumer harm. The partnership with the Advertising Standards Authority has already resulted in changes to advertising policies of major technology companies, ensuring that only FCA-approved financial promotions are permitted. The FCA plans to continue engaging with industry stakeholders to strengthen consumer protection measures.

The consultation on the new social media guidance will be conducted over the next eight weeks. This initiative aligns with the FCA’s commitment to reducing harm and establishing higher standards within the financial industry.

Earlier this year, the FCA issued warning letters to against crypto atm operators. The banking watchdog and West Yorkshire Police have teamed together to take on operators of cryptocurrency ATMs in Leeds, in northern England.

The agency also alerted crypto companies about upcoming financial marketing guidelines for UK clients. It said that crypto enterprises in the nation would have four legitimate avenues to comply with its guidelines for digital asset marketing, which will go into effect on October 8, 2023.

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