To protect consumers and combat unlawful advertising practices in the crypto market, the UK’s Financial Conduct Authority (FCA) has rolled out stringent regulations for cryptocurrency advertising. The FCA’s ongoing commitment to safeguarding individuals from scams and excessively risky investments has led to the introduction of measures that aim to keep consumers informed and protected in the volatile world of digital assets.
The latest proposal by the FCA, released on July 17, targets promotional memes and financial influencers, also known as “finfluencers,” in its bid to ensure compliance with advertising laws. The FCA has noticed an increase in memes from crypto firms being circulated online, which many don’t realize are subject to promotional rules. The crypto sector, in particular, has seen a surge in promotional memes, leading the FCA to emphasize that any form of communication can be considered a financial promotion.
Given the high-risk nature of crypto investments, the FCA permits advertising to retail investors, but strict requirements, including risk warnings and a ban on investment incentives, must be adhered to. The FCA’s vigilance in monitoring financial promotions has yielded results, with 69% of financial promotions from authorized firms on websites or social media being amended or withdrawn following FCA intervention in Q4 2022.
However, the rise of finance-oriented influencers promoting financial products without sufficient knowledge, especially targeting a younger audience, has become a cause for concern. The FCA’s warning to influencers highlights that promoting financial products without adherence to regulatory guidelines could lead to serious consequences. Offenses could result in up to two years in jail, an unlimited fine, or both, even for promotions originating from outside the UK that impact the country.
An FCA report found that over 60% of 18- to 29-year-olds follow social media influencers, with three-quarters trusting their advice. This highlights the significant influence wielded by “finfluencers” on the investment decisions of younger demographics.
With public comments on the proposed guidance open until September 11, the FCA aims to enhance its 2015 guidance on social media financial promotions, clarifying expectations for marketers regarding the implementation of regulations around promotions.
Earlier this, Todayq news reported that the FCA and Advertising Standards Authority (ASA) took a tougher stance against crypto scams, warning “finfluencers” against promoting get-rich-quick schemes and other risky investments. Their joint campaign released a checklist to ensure influencers adhere to rules when endorsing investments, thereby protecting people from being shown scams or overly risky ventures. This joint campaign with the ASA emphasizes the importance of influencers following regulatory guidelines when endorsing financial products, particularly in the crypto sector.
It has become crucial for regulators to maintain vigilance and provide clear guidelines for responsible advertising and investment practices. By working collaboratively with influencers, the FCA aims to mitigate the risks associated with the crypto market and safeguard investors, particularly the younger audience targeted by finance-oriented influencers.