The UK’s Financial Conduct Authority (FCA) has issued guidelines for crypto advertising regulations, clarifying their application following the implementation of a new promotion regime for the industry on October 8. These guidelines, which were established after a June-August consultation, stipulate that firms promoting crypto to UK consumers must include appropriate risk warnings in all communications with a promotional aspect. Additionally, the FCA emphasizes the need for evidence to substantiate claims made in promotional materials.
The guidance states that crypto assets purporting to be backed by a commodity must provide proof of such backing, which can be demonstrated through disclosures, independent audits, and proof of deposits. The industry is required to demonstrate the authenticity of stability claims, particularly those linked to a fiat currency.
Concerning financial promotions related to lending and borrowing, specific risks must be disclosed. Complex yield models should provide clear evidence regarding potential rates of return, especially when a person is marketing the possibility for another person to transfer crypto for a rate of return.
The FCA also expects firms to transparently communicate changes in legal and beneficial ownership of assets to customers. Due diligence must be conducted on both the crypto asset and the service being promoted to ensure they are not associated with fraudulent activity. Additionally, firms are discouraged from using their regulated status to claim a competitive advantage over other firms in their promotional materials.
The FCA has taken a proactive stance by including 221 firms it deems non-compliant with the new regime on an alert list. The regulator has also indicated its commitment to enforcing action against companies that do not exercise diligence in approving advertisements.