Following the implementation of a new marketing regime for the industry on October 8, the U.K.’s financial watchdog released guidelines on its crypto advertising rules on Thursday. This provided clarification on how the rules should be applied.The rules, which come after the Financial Conduct Authority’s June–August consultation, mandate that companies provide suitable risk warnings on any correspondence with UK clients that include a “promotional” aspect.They also touch on the necessity of proof to back up statements made in advertising materials.
“While the new rules for firms marketing crypto to U.K. consumers are aligned with the existing rules for other high-risk investments, we’ve engaged extensively with industry and designed this guidance to specifically support crypto firms complying,” Lucy Castledine, the FCA’s director of consumer investments, said in a statement.
According to the guidelines, cryptocurrency assets that make this claim will have to provide proof.According to the FCA, firms can submit the proof through disclosures, independent audits, and deposit confirmations.According to the letter, the business will have to “demonstrate that claims of stability, such as links to a fiat currency, are bona fide.”
Particular hazards associated with lending and borrowing should be included in financial advertising.Furthermore, robust yield models require unambiguous proof of possible rates of return.When person A offers to allow person B to send cryptocurrency to person A in exchange for a rate of return, this creates a complex yield model.Also, the FCA wants businesses to inform clients in plain English of any changes to asset ownership, both legally and beneficially.Additionally, businesses will have to perform due research on the cryptocurrency asset and service they are endorsing, which includes making sure the cryptocurrency isn’t connected to any fraudulent activities.
“Firms should not use their regulated status in a promotional way. For example, by using their regulated status to claim or imply a competitive advantage over other firms,” the guidance said.
The agency has already put 221 businesses on a warning list that it believes do not comply with the new rules, and it has threatened to take legal action against businesses who approve advertisements carelessly.