UK watchdog: Memes are non-compliant with financial rules

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The U.K.’s Financial Conduct Authority (FCA) is considering rolling out additional rules to regulate digital currency promotions as it continues its crusade against erring players in the ecosystem.

In a statement, the FCA disclosed that the incoming rules will be focused on the social media promotion of digital and other financial assets. The FCA has its eyes on using memes on social media platforms, alleging that they may constitute financial promotion to consumers.

Too many people across the UK are being shown financial promotions from unsuitable sources.

We’ll be ramping up our work to stamp out illegal financial promotions, particularly those found on social media. #financialpromotions #financialservices https://t.co/sK8r5ExxVm

— Financial Conduct Authority (@TheFCA) July 17, 2023

The draft rule could force service providers and influencers to include disclaimers on memes, warning consumers that investing in digital assets carries a measure of risks. The FCA proposal seeks to unify all financial promotions under standardized rules across several social media platforms.

However, the bulk of the new rules appear to specifically target digital currency promotions. Starting in October, the FCA says it will impose a ban on “refer a friend” bonuses on digital currency platforms and will require firms to impose a 24-hour cooling down period for new users to get familiar with the asset class.

The FCA’s new guidance stipulates rules for influencers promoting digital currency offerings to conduct due diligence and should indicate risk warning that digital currencies are not 100% foolproof. The new rules are open for public comment until September 11, with interested parties expected to air their opinion with the FCA before rollout.

“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online,” Lucy Castledine, Director, Consumer Investments at the FCA, said. “And for those touting products illegally, we will be taking action against you.”

The FCA disclosed that the proposed rules stem from a marked increase in the number of individuals making investment choices from social media. In 2021, the FCA’s survey noted that 58% of the 1,000 people surveyed stated that social media hype played a significant role in their decision to invest in digital currencies.

In early July, the financial watchdog released a handbook specifying four routes for digital currency service providers to make promotions, giving firms a three-month window to prepare for the new changes.

FCA in the thick of things

Since the start of the year, the FCA has ramped up its efforts at regulating digital currency promotions, teaming up with the Advertising Standards Authority (ASA). A joint campaign with the ASA led to the release of guidelines for influencer promotions of digital currencies and a streak of enforcement action against erring firms.

The FCA’s interest in financial promotion has seen 69% of promotions amended to comply with standing rules in the last quarter of 2022. After several unheeded warnings, the FCA moved to shut down the operations of 26 digital currency ATMs operating illegally in the country.

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