U.K.’s Financial Conduct Authority (FCA) is clamping down on the use of social media to promote digital currencies in the country after gaining new oversight functions.
The FCA received the nod from Parliament to regulate digital currency promotions following the approval of the Financial Services and Markets Act. Under the incoming rules, the FCA will attempt to align digital currency advertisement with the existing rules on financial promotion.
In a consultation document published on July 17, the FCA pointed out that it will be extending its crusade at standardizing promotions to social media and the use of influencers. Per the statement, the FCA stated that unpaid influencers promoting digital assets intending to be hired or seek a larger following will “fall within the scope of promotion rules.”
“Unauthorized persons, such as social media influencers, who promote a regulated financial product or service without the approval of an FCA authorized person may be committing a criminal offense,” the FCA’s statement read.
The FCA is pushing for influencers to ensure that their promotional posts warn about the risks of investing in digital assets. Furthermore, the financial regulator notes that incoming rules will require influencers to include clear labeling that a post is a paid advertisement.
Memes are not left out of the FCA’s crackdown on social media promotions. The regulator hinted that memes promoting investment in digital assets would have to comply with the requirements of a disclaimer on the risks.
The public is encouraged to submit their opinions on the draft rules before September 11, with the FCA confirming that “subject to the responses received, intend to publish final guidance later in 2023.”
The FCA disclosed that the reason for the new social media advertising rules stems from an increase in the number of residents being fed with promotions “from unsuitable sources.” According to the survey from the regulator, nearly 60% of millennials and Gen Zs blamed social media hype for their investments in digital assets.
Citing another study, the FCA noted that most young U.K. residents say they trust investment advice from social media influencers.
Tight rules on promotion before the FCA
Before the FCA’s new oversight functions, digital currency promotions were tightly regulated by the Advertising Standards Authority (ASA). The ASA had garnered a reputation for flagging down digital currency ads that failed to meet its minimum requirements, with Crypto.com and eToro forced to take down their promotions.
In September, the ASA flagged the social media advertisements of two reality TV stars for “trivializing” digital currency investments. In early 2023, the ASA teamed up with the FCA to roll out a checklist for celebrities promoting digital currency products, urging them to avoid promoting scams and illegal offerings.
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