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The United Kingdom's Financial Conduct Authority (FCA) has suggested that crypto memes could fall under the category of financial promotions, under a newly proposed guidance.
This has significant implications for crypto businesses and influencers, as they may need to attach disclaimers to memes related to cryptocurrencies to comply with the country's advertising laws.
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
On July 17, the FCA publicized its proposal for rules on financial promotions circulated on social media. The focus of these new guidelines is mainly on promotional memes and financial influencers, colloquially known as "Finfluencers."
The FCA has noted a surge in memes from cryptocurrency companies circulating on the internet, many of which it believes fall under the scope of its promotional regulations. The watchdog highlighted that such memes are particularly common within the crypto sector and stressed that all forms of communication could potentially be classified as financial promotions.
The regulatory body treats cryptocurrency as a high-risk investment. While it can be marketed to general retail investors, certain stipulations must be followed, like including risk warnings and abstaining from offering investment incentives.
The FCA revealed that in the last quarter of 2022, around 69% of financial promotions on websites or social media from regulated firms were revised or retracted after the FCA stepped in.
The FCA has initiated this consultation to bring its 2015 guidance up to date and clarify how marketers should abide by its regulations regarding promotions.
Moreover, the FCA pointed out the rising trend of influencers promoting financial products they are often poorly informed about, and which usually target younger audiences.
Meme Promotions Could be a Criminal Offense
The regulator warned influencers that their promotions could potentially be considered a criminal offense, leading to penalties such as two years of imprisonment, unlimited fines, or both. The law is applicable even to promotions originating outside the UK if they could influence behavior within the country.
In justification of the new guidelines, the FCA cited a report indicating that over 60% of individuals aged 18-29 follow social media influencers, with around three-quarters stating they trust these influencers' advice.
According to a 2021 survey by the FCA, approximately 58% of respondents under 40 years old mentioned that the hype generated by social media and news influenced their decision to invest in what the regulator deems a high-risk product.
