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FCA Issues New Guidance on Digital Asset Promotion Rules

The UK’s Financial Conduct Authority (FCA) issues new guidance clarifying digital asset promotion rules, including the need for FCA authorization and clear, non-misleading advertisements.

Key Takeaways

  • The FCA has released new guidance outlining its expectations for firms promoting digital asset offerings in the United Kingdom.
  • These guidelines do not introduce new obligations but offer further clarity on the responsibilities that became effective at the start of October.
  • Digital asset advertisements now require FCA authorization in the UK and must adhere to specific criteria, including being fair, clear, and non-misleading.
  • The FCA has issued warnings to non-compliant digital asset promoters, with concerns about industry engagement and a growing number of warnings issued.

The New Guidance: A Closer Look

The FCA’s new guidance aims to provide greater insight into the regulations surrounding digital asset promotions in the United Kingdom. These regulations, which came into effect at the beginning of October, mandate FCA authorization for any digital asset advertisement within the country.

Lucy Castledine, Director of Consumer Investments at the FCA, emphasized the alignment of these rules with existing high-risk investment regulations while acknowledging the need to support crypto firms in compliance.

The guidance emphasizes the importance of ensuring digital asset promotions are “fair, clear, and not misleading.” Firms are expected to conduct substantial due diligence on the cryptoassets they promote and consider consumers’ information needs. Factors such as clarity, risk comprehension, providing balanced information, avoiding exaggerated claims, and disclosing costs are all crucial aspects of compliance.

Challenges in Compliance

The FCA’s concerns about non-compliance were substantiated by the issuance of 146 warnings within the first 24 hours of the rules’ implementation, which later increased to 221. Common issues identified included overly optimistic safety claims, insufficiently visible risk warnings, and a lack of adequate information about product risks.

To Conclude

Non-compliant firms have been added to the FCA’s ‘warning list,’ and the regulator possesses the authority to ban non-compliant advertisements. Furthermore, breaching these promotional rules is considered a criminal offense, carrying penalties of up to two years imprisonment, unlimited fines, or both.

In conclusion, the FCA’s new guidance on digital asset promotion rules aims to provide clarity and ensure transparency in the rapidly evolving digital asset market. With a growing number of warnings issued and stringent penalties for non-compliance, the FCA underscores its commitment to safeguarding investors and promoting responsible digital asset advertising practices.