The U.K.’s Financial Conduct Authority (FCA) is set to put in place tough new rules for crypto advertising as soon as planned laws for the industry are finalized, according to documents published Thursday.
Under the new rules, crypto will be classified as “restricted mass market investments,” which will require any advertisements or promotions to contain “clear risk warnings,” and bans incentives to invest such as “refer a friend” or “new joiner bonuses,” the regulator said.
Crypto is set to be included in the scope of U.K.’s regulated financial activities through the Financial Services and Markets Bill, which represents the country’s post-Brexit financial strategy and is currently moving through Parliament. With the bill, the FCA gets powers to set rules for the sector in accordance with the applicable laws.
When the FCA consulted on these rules last year, respondents largely disagreed with the proposals including the regulator’s intention to treat crypto as a high risk investment and to block new investors from receiving non-real-time promotion offers (DOFP), the report said. The FCA will proceed with these measures nonetheless, it added.
Alongside the upcoming rules, the FCA also opened for public comment new guidance aimed at ensuring “firms clearly understand the implications of this requirement for crypto asset promotions,” the document said.
The proposed guidance says crypto firms should 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.”
For those communicating promotions for stablecoin firms, they will have to ensure that claims regarding stability or links to a fiat currency are not misleading. It also set out a range of other measures.
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 FCA also set out this strategy as part of its commitment to reduce and prevent serious harm, a press release said.
“It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision,” Sheldon Mills, executive director of consumers and competition at the FCA said in a press release. “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, the document said.