Crypto Marketing Pitfalls

 

The UK’s Financial Conduct Authority (FCA) has identified three recurring issues in the promotion of cryptoassets:

Misleading Claims on Safety and Ease of Use: Promotions asserting the safety, security, and ease of cryptoasset services without adequately disclosing the associated risks.

Inadequate Risk Warnings: Promotions frequently feature risk warnings in small, hard-to-read fonts or in locations that are not easily noticeable.

Lack of Information on Product Risks: Insufficient information about the risks linked to specific cryptoasset products being promoted.

The FCA expects authorised firms approving these promotions to adhere to their regulatory responsibilities. The FCA is prepared to take action against non-compliance, as demonstrated by the restrictions already imposed on a firm for failing to meet these standards.

The FCA is collaborating with a variety of platforms and businesses to eliminate and block illegal promotions. Payment firms are being engaged to reduce UK consumer exposure to illegal cryptoasset promotions. Since the cryptoasset promotions regime became remit of the FCA, 221 alerts have been issued.

Despite new marketing rules, cryptoassets remain a high-risk and largely unregulated sector. To protect against this, consumers should consult the FCA’s Warning List prior to engaging in any crypto investments.

Since 8 October 2023, UK firms must either be authorised or registered by the FCA, or have their marketing approved by an authorised firm, to legally promote cryptoassets. These promotions must be clear, fair, and not misleading, with prominent risk warnings and should not unjustly encourage investments.

The Government has set out 4 routes cryptoassets firms can take to lawfully communicate cryptoasset promotions:

1. An authorised person communicates the promotion.
2. An authorised person approves the promotion.
3. A crypto firm registered under the Money Laundering Regulations (MLR) communicates the promotion.
4. The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.

If you require support or advice with any of the points mentioned above or think your firm may benefit from a review of your financial promotions, please contact Dan Harasemchuk or Nicholas Dunn.