The UK Financial Conduct Authority (FCA) has identified what it says are “three common issues with crypto asset financial promotions.”
Crypto promotions came under the watchdog’s remit following a change in legislation earlier this month and it has now highlighted three major red flags that it will be looking to crack down on. These are:
- Promotions making claims about the ‘safety,’ ‘security,’ or ease of using crypto asset services without highlighting the risk involved,
- risk warnings not being visible enough due to small fonts, hard-to-read coloring, or non-prominent positioning,
- firms failing to provide customers with adequate information on the risks associated with specific products being promoted.
Under the new rules, firms wanting to promote crypto assets in the UK, regardless of where they’re based, must be authorized or registered with the FCA. New promotions must be “clear, fair and not misleading, labeled with prominent risk warnings, and must not inappropriately incentivize people to invest.”
According to the FCA, customers dealing with any so-called ‘unauthorized firms’ won’t be covered by the UK’s financial ombudsman or Financial Services Compensation Scheme.
In a statement published today, the regulator says it’s working with social media platforms, app stores, search engines, and domain name registrars to remove or block illegal promotions. It also says that it expects authorized firms to take their regulatory obligations seriously and play their part in protecting customers.
The regulator added that, since the new rules came into effect, it has issued 221 alerts and that its ‘warning list’ will be updated regularly with firms that “illegally communicate crypto asset promotions and fail to engage with us constructively.”