FCA Issues ‘Tough’ New Crypto Marketing Rules As Ownership Doubles

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New rules to protect individual UK investors looking to add crypto to their portfolio are being introduced by the Financial Conduct Authority (FCA).

Described as “tough” by the FCA, the rules reclassify crypto as “restricted mass market investments” and focus on how crypto is advertised and promoted.

This means that cryptoassets can still be mass marketed to UK consumers, but restrictions apply and any promotions must be “fair, clear and not misleading”.

According to the FCA, the new rules “mean crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto.”

“Those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair and not misleading,” it added.

The FCA’s rules on crypto promotion in the UK at a glance:

Ban on refer a friend schemes

A ban on popular ‘refer a friend’ schemes designed to incentivise people to promote a specific crypto exchange or service.

Coinbase, one of the largest exchanges in the world, ran a popular scheme whereby you and the person you referred would earn £10 in Bitcoin if that person signed up and traded more than £100 in crypto.

Nearly every exchange, and many other platforms in the space, have their version of a referral scheme with various incentives on offer, including trading bonuses and reduced fees.

Ban on free NFTs

Crypto websites, particularly those centred around Non-Fungible Tokens, often feature giveaways and airdrops where account holders are given free NFTs.

This practise will be banned under the new rules and the sites will no long be able to give users with NFTs.

Cooling-off period for first time investors

First-time crypto investors will be offered a 24-hour cooling-off period from October 8, 2023.

Stablecoin stability

Firms promoting stablecoin will have to demonstrate “claims of stability or links to a fiat currency” are genuine.

Investors often regret decisions

Sheldon Mills, Executive Director, FCA Consumers and Competition, 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.

“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”

The new rules cement the UK Government’s desire to see crypto promotions brought under the remit of the FCA.

Crypto ownership doubles in UK

Research by the FCA shows that crypto ownership more than doubled from 2021 to 2022.

Some 10% of 2,000 people surveyed by the regulator said that they now own crypto.

FCA rules follow MiCA laws

The new rules were agreed just months after the new Markets in Crypto-Assets (MiCA) laws were agreed by EU members.

The MiCA regulations are designed to ensure financial stability by protecting crypto investors from harm, while at the same time supporting innovation and competition.