The UK’s top financial watchdog, the Financial Conduct Authority (FCA), has kicked off 2023 with strict warnings for the tech and crypto sectors, amid concerns that the cost of living crisis will make some more susceptible to financial scams.
Last year, the FCA made companies change or remove 8,252 misleading or fraudulent promotions — 14 times more than in 2021.
This sharp uptick in FCA regulation is expected to continue this year.
The UK government published a policy statement on Sunday, outlining its overhaul approach to crypto regulation. It indicated that it will seek to introduce a framework for promotion that brings crypto assets in-line with other financial products, as well as include a “bespoke exemption” in the Financial Promotion Order for crypto firms registered with the FCA to communicate to UK customers.
In its official statement the following day, the FCA said that “cryptoasset businesses marketing to UK consumers, including firms based overseas, must get ready for this regime.”
Pending Parliamentary approval, the “regime” will create four official ways to promote crypto in the UK:
- Have an FCA-authorized person announce it,
- get it approved by an FCA-authorized person,
- communicate it through a crypto firm registered under the MLRs with the FCA,
- or make sure it falls under the “bespoke exemption” category.
However, the FCA has warned on Monday that a prison sentence of up to two years could be the price of breaking new restrictions on financial promotions.
“Promotions that are not made using one of these routes will be in breach of section 21 of the Financial Services and Markets Act 2000 (FSMA), which is a criminal offence punishable by up to 2 years imprisonment,” the FCA stated.
FCA holds tech accountable for surge in scams, too
Finalized rules are expected to be published once legislation has been made. However, the FCA made clear that crypto companies should be taking the necessary preparations now in order to be ready when the watchdog comes knocking.
“We expect cryptoasset businesses to be ready, willing and organised at the point of their application,” the FCA said. “Acting now will help ensure [crypto firms] can continue to legally promote to UK consumers. We encourage firms to take all necessary advice as part of their preparations.”
However, the FCA isn’t just aiming to hold crypto accountable for a surge in financial scams. Last week, tech firms were told to do more to protect consumers, following a major increase in scam promotion on Instagram, Facebook, YouTube, and other platforms led to a record number of take-down orders.
“More needs to be done by tech companies to protect consumers,” the watchdog said. It further emphasized that ‘fin-fluencers’ should think very carefully before endorsing financial products and to clearly disclaim the promotional deal in ads.
Sarah Pritchard, FCA executive director for markets, said: “This year, we will continue to put the pressure on people using social media to illegally promote investments, which put people’s hard-earned money at risk.”