The UK’s financial regulator has unveiled new proposed guidelines requiring crypto firms and influencers to add disclaimers to crypto-related memes.
In its recently released guidance on social media financial promotions, the Financial Conduct Authority (FCA) specifically targets promotional memes and financial influencers, commonly called “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
The financial regulator expressed concern over the proliferation of memes from crypto firms that circulate online without adhering to its promotional rules.
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Promotional memes have become increasingly prevalent in the crypto sector, and the FCA emphasized that any form of communication, including memes, could be considered a financial promotion.
The FCA cited misleading or unclear advertisements that fail to adequately inform consumers about the potential risks of financial products.
Examples include individuals on TikTok promoting debt counseling without providing a comprehensive understanding of the risks involved, as well as buy-now-pay-later Instagram ads that neglect to outline the relevant risks associated with unregulated credit.
Subsequently, the FCA warns influencers, cautioning that non-compliance with the regulations could lead to severe consequences.
Promotions that violate the guidelines may be punishable by up to two years in jail, an unlimited fine, or both. It is important to note that these regulations extend to promotions from outside the UK that may impact the country.
The decision to introduce stricter regulations is driven by social media influencers significant sway over consumer behavior.
In a research by consultancy firm MRM, nearly three-quarters of young people trust information provided by social media influencers.
A survey conducted by the FCA in 2021 further revealed that almost 60% of individuals under 40 who have invested in high-risk products based their decisions on social media posts and news.
The FCA is further enhancing consumer protection by announcing additional measures. Effective Oct. 8, incentives to invest in cryptocurrencies, including “refer a friend” bonuses, will be prohibited. Additionally, crypto firms must include explicit risk warnings in their advertisements.
The new consumer duty rules, which come into effect at the end of this month, aim to ensure fairer and clearer social media promotions by financial services firms.
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