Crypto memes have become a popular form of expression in the cryptocurrency space, often shared on social media platforms. However, a new proposed guidance from the UK’s Financial Conduct Authority (FCA) suggests that these memes could be considered financial promotions and may be subject to advertising laws in the country.
The FCA has expressed concerns that many people are being exposed to financial promotions from sources that may not be suitable or reliable. This is particularly prevalent in the crypto sector, where promotional memes are commonly circulated. The FCA emphasizes that any type of communication, including memes, could potentially be deemed a financial promotion.
The FCA considers cryptocurrencies to be high-risk investments and has specific regulations in place for their promotion. Retail investors can be targeted with crypto advertisements, but they must include risk warnings and are prohibited from using investment incentives. The FCA revealed that in the fourth quarter of 2022, 69% of financial promotions on websites or social media from authorized firms were either amended or withdrawn as a result of intervention by the regulator.
To address these concerns and update its guidance from 2015, the FCA has launched a consultation aimed at clarifying its expectations regarding the implementation of regulations on promotional activities. The regulator points out that it has witnessed an increase in financial products being promoted to younger audiences without adequate knowledge, often through influencers on social media platforms.
The FCA warns both crypto firms and influencers that failing to comply with financial promotion rules could result in criminal offenses and carries penalties of up to two years in jail, unlimited fines, or both. It is important to note that these rules also apply to promotions originating from outside the UK but have an impact within the country.
The FCA’s decision to address the issue of crypto memes and financial promotions is based on research that indicates a significant portion of young individuals follow and trust social media influencers. A survey conducted in 2021 by the regulator revealed that 58% of respondents under the age of 40 cited social media hype and news as influencing their investment decisions in cryptocurrencies.
Public comments on the proposed guidance will be open until September 11, giving interested parties an opportunity to provide feedback and suggestions. In the meantime, it is likely that crypto firms and influencers will need to start adding disclaimers to their promotional memes to ensure compliance with advertising laws in the UK.
This development highlights the growing scrutiny and regulation surrounding the cryptocurrency industry, as authorities strive to protect consumers and ensure they make informed investment decisions. As the popularity of cryptocurrencies continues to increase, it is important for both investors and industry participants to stay updated with the evolving regulatory landscape.