The UK’s Financial Conduct Authority proposes strict regulations on crypto memes, promotions, and influencers, with non-compliance carrying severe penalties.
Cryptocurrency businesses and influencers may soon need to tread more carefully when using memes for promotional activities. The United Kingdom’s watchdog, the Financial Conduct Authority (FCA), is considering a fresh proposal that could change the meme game for the crypto industry.
On July 17, the FCA unveiled proposed guidelines that take aim at social media financial promotions. Specifically, these guidelines focus on two main areas: memes that promote crypto investments, and social media personalities who influence finance decisions, popularly known as “finfluencers”.
Memes, once considered a form of fun digital communication, are now viewed by the FCA as potential financial promotions. The FCA noticed a trend where crypto firms use memes to advertise their products, and many people don’t realize these memes are promotional in nature. As a result, the FCA clarified that any form of communication could count as a financial promotion, particularly within the high-risk realm of cryptocurrencies.
The High Stakes of Failing to Play by the Rules
The FCA’s proposed guidelines aim to protect investors by introducing strict consequences for those who fail to follow them. If firms and influencers neglect to comply, they could face stiff penalties, including up to two years in prison. This step is part of the FCA’s commitment to creating a transparent crypto investment environment.
Despite cryptocurrencies involving high-risk investments, the FCA allows companies to advertise to the general public, provided that these ads include clear risk warnings and avoid any incentives that could potentially mislead investors.
The FCA’s firm stance isn’t new. In fact, during the final quarter of 2022, they stepped in and caused 69% of financial promotions on websites and social media from approved companies to be revised or removed entirely. The FCA now wants to update its previous guidance, established in 2015, to make it crystal clear marketers should do in relation to financial promotions.
‘Finfluencers’
As digital media takes center stage, ‘finfluencers’ have begun to dominate the financial scene, especially among younger audiences. However, the FCA is wary. They’ve observed that many of these influencers promote financial products they don’t fully understand, posing a risk to their followers.
The new guidelines, therefore, include a serious warning for ‘finfluencers’. If they fail to adhere to the regulations, they may face severe penalties, which include a potential two-year prison sentence or an unlimited fine. These rules are not only for UK-based influencers, but also apply to those influencing from abroad.
This stern approach is backed by data. A study shows that over 60% of young adults (18-29 years) follow social media influencers, and three out of four trust the advice they receive from these sources. An FCA survey in 2021 further highlighted the influence of social media, with 58% of respondents under 40 attributing their investment in high-risk products to the hype generated on these platforms.
The FCA’s proposed guidelines are open for public opinion until September 11. This open approach demonstrates the regulator’s dedication to creating a transparent and trustworthy financial landscape, specifically for cryptocurrencies. With the rapid expansion of the crypto space, it’s essential to continuously update guidelines to ensure everyone can invest safely and responsibly.
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