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UK’s financial watchdog clamps down on digital currency promotion with new regulations

The U.K. Financial Conduct Authority (FCA) has taken steps to unify digital asset advertisements by bringing them within the purview of existing financial promotion rules.

The financial watchdog disclosed the new advertisement regime in a July 4 letter to virtual asset service providers (VASPs) in the U.K., warning that failure to comply will result in criminal liability.

Under the guidelines, all virtual asset promotions may be carried out via four routes, the first being through an authorized person. Per the FCA’s handbook, an authorized person is a VASP with a regulatory license from the regulator to operate in the U.K.

The second route for firms to promote their digital asset offering is through an unauthorized person but must be “approved by an authorized person.” Firms can make digital asset advertisements if they have obtained FCA registration under the U.K.’s anti-money laundering (AML) law.

The regulator will not flag advertisements falling under the exemption clause of the Financial Services and Markets Acts. The FCA’s letter indicates that firms have until October 8 to comply with the new rules.

“It is up to people to decide whether they buy crypto,” said FCA executive director Sheldon Mills. “But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.”

After the rules come into effect, violations will result in prison terms of up to two years with the additional payment of fines. The FCA noted that it would also ramp up its enforcement action against erring firms, including blocking illegal promotions and issuing public advisory warnings against defaulters.

In April, the FCA teamed up with the U.K. Advertising Standards Authority (ASA) to issue a seven-point checklist to guide the use of influencers in marketing digital currency services. The campaign featured reality TV star Sharon Gaffka, urging influencers to label promotions as “paid advertisements” and make proper disclosures that digital assets carry a measure of risk.

Digital currency promotions are in the crosshairs

In the wake of the turmoil facing the industry, regulatory authorities are opting to crack down on digital asset promotions as the first step to protect investors. In the U.K., the Advertising Standards Authority (ASA) is on a crusade against advertisements that fail to meet its minimum standards.

Meanwhile, French legislators are tinkering with the best ways to regulate the use of influencers for digital currency promotions, opting to allow licensed firms to employ their services. In Thailand, firms are expected to make proper disclosures on all adverts to the Securities and Exchange Commission and make the promotions only on official platforms.

Watch: Regulation on Bitcoin and Influencer needs

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