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Meme coins are in the sights of the UK’s financial regulator as it prepares a crackdown on the promotion of financial products on social media.
The Financial Conduct Authority, the British financial watchdog, issued new proposed guidance in a press release on July 17 that indicated a focus on promotional memes and financial influencers, or “finfluencers.”
Too many people across the UK are being shown financial promotions from unsuitable sources.
We’ll be ramping up our work to stamp out illegal financial promotions, particularly those found on social media. #financialpromotions #financialservices https://t.co/sK8r5ExxVm
— Financial Conduct Authority (@TheFCA) July 17, 2023
With the proposed social media guidelines, the FCA aims to update and modernize the information that companies should use when promoting financial products or services on online platforms.
The UK financial regulator said it was widely consulting on how to expand its guidelines, considering the evolving ways in which platforms like Facebook, Instagram, and TikTok are utilized for advertising financial services and products.
Crypto Meme Coins are Subject to FCA Promotional Rules
The FCA continues to double down on its efforts to combat illegal financial promotions. In light of the growing popularity of “finfluencers” and the potential risks of online consumer harm, the FCA has heightened its scrutiny of financial promotions, especially those that may be illegal, on online platforms.
“We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm,” said director of consumer investments Lucy Castledine. “We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.”
Castledine also said that the regulator has recognized “the significant increase in the notoriety of finfluencers, adding “those touting products illegally, we will be taking action against you.”
According to the FCA, crypto firms have been circulating memes online without knowing that they are subject to its promotional regulations. It said “use of memes in promotions is particularly prevalent in the crypto asset sector” adding any type of communication could be considered a financial promotion.
Cryptocurrency is considered a high-risk investment by the FCA. Nonetheless, it is permissible to advertise it to retail investors, but certain conditions apply, including the inclusion of risk warnings and a prohibition on investment incentives.
An excerpt from the press release reads:
“We remind firms that there are requirements to include risk warnings or other statements in promotions for certain products/services. These rules are media neutral, so apply to social media as they would any other channel. We expect risk warnings on social media to be clear, prominent and without a design feature that reduces their visibility or prominence.”
As such, the FCA cautioned influencers and crypto companies that their promotions could constitute an offense, punishable by a potential two-year jail term, an unlimited fine, or both. Notably, this law applies even to promotions originating from outside the U.K. That could have an effect in the country.
The FCA holds the view that materials presented by influencers frequently oversimplify the complexity of certain financial instruments. Consequently, the regulator intends to engage in consultations with the industry to explore ways of improving control over advertisements on social media.
The regulator welcomes views and comments from the public on the proposed guidance by 11 September 2023.
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