No more ‘refer a friend’ bonuses: FCA reminds crypto firms of new marketing rules in UK

Rick Steves

“A notable transformation is underway, where promoting any digital service or product without ensuring its suitability for customers is poised to become a criminal offense. This shift in approach is a clear indication of regulators’ commitment to protecting consumers’ interests.”

The Financial Conduct Authority (FCA) has introduced robust measures aimed at enhancing the clarity and accuracy of marketing practices within the cryptoasset industry, with these stringent regulations set to come into effect on October 8, 2023.

These rules will not only require greater transparency but will also ban incentives such as ‘refer a friend’ bonuses.

Recognizing the complexities involved in implementing these changes, the FCA has indicated its willingness to consider granting cryptoasset firms additional time for specific adjustments, such as the introduction of a 24-hour cooling-off period.

To qualify for this flexibility, firms must first seek approval, allowing them the necessary time to make the essential technological and operational modifications. This approach aligns with the FCA’s strategy from last year when it imposed rules on marketing other high-risk investments.

Crypto firms’ marketing must be clear, fair, and not misleading

The FCA’s new regulations, taking effect from October 8, 2023, will significantly bolster consumer protection within the cryptoasset market. These rules will mandate that cryptoasset firms’ marketing materials are “clear, fair, and not misleading.”

Furthermore, they must prominently display risk warnings and refrain from inappropriately incentivizing individuals to invest. These regulations apply globally, meaning they encompass firms operating internationally and aim to mitigate the substantial risks associated with cryptoassets.

Lucy Castledine, Director of Consumer Investments at the FCA, said: “From this October, crypto firms must market to UK consumers clearly, fairly, and honestly. And they must provide risk warnings people understand. As a proportionate regulator, we’re giving firms that apply a little more time to get the other reforms requiring technology and business change right.”

Concerns have been raised regarding the lack of engagement from many overseas and unregulated crypto firms in adhering to these new regulations. The FCA intends to take action against any firms illegally marketing to UK consumers after the October deadline.

A robust regulatory framework for the cryptoasset industry

Any individuals or entities continuing to promote cryptoassets to UK customers without adhering to the rules post-October could face severe penalties, including the possibility of an unlimited fine and/or up to two years in prison.

To facilitate firms in making necessary improvements to their marketing practices, the FCA has released examples of both good and poor practices in preparing for these new marketing rules.

However, the FCA continues to emphasize the high-risk nature of investing in cryptoassets, advising individuals to be prepared for the possibility of losing all their invested funds.

The FCA’s initiatives reflect its commitment to reducing and preventing significant harm, setting and testing higher standards, and promoting competition and positive change within the financial industry. As the regulatory landscape for cryptoassets continues to evolve, these measures aim to ensure that consumers are adequately protected and informed when participating in the cryptoasset market.

The implementation of these new regulations is part of the broader efforts by the UK government and international regulatory bodies to establish a robust regulatory framework for the cryptoasset industry, promoting transparency, security, and responsible conduct.

“Crypto marketing without ensuring suitability is poised to become a criminal offense”

Steve Rosenblum, CEO and Co- Founder of Libertify, an AI crypto risk management platform, commented on these recent developments. “The UK regulatory landscape is rapidly shifting its focus towards embracing solutions like Libertify, with a paramount emphasis on risk mitigation for safeguarding the interests of retail consumers.

“A notable transformation is underway, where promoting any digital service or product without ensuring its suitability for customers is poised to become a criminal offense. This shift in approach is a clear indication of regulators’ commitment to protecting consumers’ interests.

“The era when crypto players operated primarily in their self-interest is unequivocally drawing to a close. The new focus is on safeguarding the interests of retail investors, and Libertify is poised to be a preferred choice in providing an additional layer of risk management for businesses, managers, and end consumers.”

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