The FCA has announced new marketing rules which will require those marketing cryptoassets to UK consumers to introduce a cooling off period for first time investors from 8 October 2023.
As part of a package of measures designed to ensure those who buy crypto understand the risk, ‘refer a friend’ bonuses will also be banned.
The new rules mean crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto. Those promoting crypto will also be required to put in place clear risk warnings and ensure adverts are clear, fair and not misleading.
The FCA’s rules follow government legislation to bring crypto promotions into the regulator’s remit.
The new rules comes into effect as research from the FCA shows that the estimated crypto ownership has more than doubled from 2021 to 2022, with 10% of the 2,000 people surveyed stating that they own crypto.
The FCA says that the approach taken to the promotion of crypto is consistent with the rules introduced by the FCA last year to tackle misleading financial advertisements of high-risk investments.
It also supports the FCA’s three core commitments laid out in its 2023/24 business plan to reduce and prevent serious harm, set and test higher standards and to promote competition and positive change.
The FCA is also consulting on guidance to provider further clarification on the expectations of firms communicating cryptoasset financial promotions to ensure promotions are clear, fair and not misleading. The consultation ends on 10 August.
Before the FCA’s remit was expanded to include financial promotions for crypto products and services, the ASA had banned several crypto firms’ promotions for being misleading and irresponsible. For example, Luno’s out of home billboards told people it’s time to buy Bitcoin without a clear risk warning. Meanwhile, Arsenal Football Club’s promotion of its fan token with partner Socios on its website and Facebook was deemed by the ASA to have trivialised investing in crypto. The FCA says that it will continue to work with the ASA.
In a separate but related development, BEUC and nine of its members in Denmark, France, Greece, Italy, Lithuania, Portugal, Slovakia and Spain filed a compliant with the European Commission and consumer authorities against Instagram, YouTube, TikTok and Twitter for facilitating the misleading promotion of cryptoassets. They have published a report which they say provides evidence of the misleading promotion on Instagram, YouTube, TikTok and Twitter, in contravention of the platforms’ own advertising policies. BEUC calls on the Consumer Protection Cooperation Network to request the following from the social media platforms:
- Stricter advertising policies (and enforcement of them) platforms on the advertising of crypto.
- The adoption of measures to prevent influences from misleading consumers as to the nature of crypto,
- To inform European Commission about the effectiveness of the measures put in place to protect consumers against such unfair practices.
In addition, European consumer authorities should cooperate with European Supervisory Authorities for financial services to ensure platforms adapt their advertising policies to prevent the misleading promotion of crypto.
