Proposed Regulations by UK Watchdog: Crypto Memes Could Lead to Criminal Charges and Disclaimers for Firms and Influencers
The Financial Conduct Authority (FCA) in the United Kingdom has put forth a proposal that could potentially result in imprisonment for up to two years for individuals found in violation of financial promotion rules concerning crypto memes. The FCA’s suggested guidance aims to ensure compliance with advertising laws by requiring crypto firms and influencers to include disclaimers on promotional memes.
The FCA’s proposal, released on July 17, specifically targets financial influencers, commonly known as “finfluencers,” and addresses the widespread circulation of promotional memes by crypto firms that often go unnoticed as being subject to promotional rules. The crypto sector is particularly known for its prevalence of promotional memes, and the FCA asserts that any form of communication can be deemed a financial promotion.
Considering crypto investments as high-risk, the FCA permits their advertisement to retail investors with certain requirements, such as the inclusion of risk warnings and a ban on investment incentives. The FCA revealed that in the fourth quarter of 2022, 69% of financial promotions on websites or social media by authorized firms were either modified or retracted due to FCA intervention.
In addition to targeting promotional memes, the FCA expressed concern about the rise of finfluencers who promote financial products without adequate knowledge, particularly when targeting a younger audience. The FCA cautioned influencers that their promotions could result in criminal charges, including imprisonment for up to two years, unlimited fines, or both. This legislation applies not only to promotions originating within the UK but also to those from outside the country that can impact the UK market.
Citing a report indicating that over 60% of individuals aged 18 to 29 follow social media influencers, with three-quarters trusting their advice, the FCA emphasized the need for these reminders. A 2021 FCA survey found that 58% of respondents under 40 years old cited social media hype and news as factors influencing their investment decisions in crypto, which the regulatory authority considers a high-risk product.
The proposed guidance is open to public comments until September 11, allowing stakeholders to contribute their perspectives. This article can be collected as an NFT, preserving this historic moment and demonstrating support for independent journalism in the crypto realm.