UK’s FCA Targets Crypto Memes and “Finfluencers”
Table of Contents
Introduction
The UK’s Financial Conduct Authority (FCA) has advanced its scrutiny over the cryptocurrency space, emphasizing the legal consequences of non-compliant cryptocurrency memes and unauthorized “finfluencers”.
Too many people across the UK are being shown financial promotions from unsuitable sources.
— Financial Conduct Authority (@TheFCA) July 17, 2023
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
Memes as Financial Promotions: Crypto Under the Lens
On July 17, the FCA released new guidelines that reference a specific cryptocurrency meme. The meme juxtaposes the complexity of traditional monetary transactions with the simplicity of cryptocurrency ones. The regulatory body sees potential for misleading content in such memes and has reminded companies that every communication form can be treated as a financial promotion under specific legal provisions.
Strict Penalties Await Violators
As per the Act, the penalties for violations are severe, including up to two years in prison, unlimited fines, or both. Crucially, the FCA made it clear that any financial promotions having an impact within the UK, regardless of their origin, fall within the purview of these regulations.
The guidelines, published on July 5, notified those promoting cryptocurrencies to modify their communication approach or seek regulatory approval by October 8, 2023.
Effect on Memecoin Initiatives and “Finfluencers“
This regulatory tightening could significantly impact memecoin initiatives, which often use memes as a major promotional tool. To align with the advertising regulations, these initiatives might need to incorporate disclaimers into their memes.
The FCA guidelines also zoomed in on “finfluencers,” individuals who advocate for financial products, notably investment and credit products, through their social media channels.
The regulatory body warned that “finfluencers,” especially those active on platforms like Reddit and Telegram, might violate financial promotion restrictions irrespective of the presence of direct compensation or explicit commercial interest.
The FCA emphasized,
"We want unauthorized influencers to think carefully before promoting financial products or services and to understand their obligations when advertising through their social media channels. Promoting a regulated financial product or service without the approval of an FCA authorized person, or providing financial advice without FCA authorization, may be a criminal offense."
Conclusion
The FCA’s latest guidelines serve as a strong reminder of the rapidly evolving regulatory landscape around cryptocurrencies in the UK. While the growth and excitement around the crypto space are undeniable, these new guidelines highlight the need for clarity, compliance, and responsibility in all promotional efforts. The FCA’s action targets two specific areas: the use of memes in promoting cryptocurrency and “finfluencers” who use social media to discuss financial products. The regulation is clear – whether you are a meme creator or an influencer, if you’re promoting a financial product capable of having an impact in the UK, you must operate within the bounds of the law. These rules reinforce the crucial balance between innovation in the fintech space and the need to protect investors from potentially misleading or harmful information.