UK regulator, the Financial Conduct Authority (FCA), has issued a proposed guidance that may require crypto firms and influencers to include disclaimers on cryptocurrency-related memes in order to comply with advertising laws.
The new guidance by the UK regulator, released on July 17, specifically targets financial promotions on social media platforms, focusing on promotional memes and individuals known as “finfluencers” – financial influencers who actively promote various investment opportunities.
The FCA expressed concerns over the circulation of memes from crypto firms on online platforms, pointing out that many individuals might not be aware that these seemingly innocuous memes are subject to the regulator’s promotional rules. Notably, promotional memes have become increasingly prevalent in the cryptocurrency sector, prompting the need for clearer guidelines to ensure compliance.
According to the FCA, any form of communication, including memes, that encourages or promotes financial products or investments could be considered a financial promotion. As cryptocurrencies are classified as high-risk investments, the regulator imposes specific requirements when advertising them to retail investors. These include the mandatory inclusion of risk warnings and a ban on investment incentives to protect potential investors from undue risks.
UK Regulator Warns Influencers Promoting Finance Products to Younger Audiences
The UK’s Financial Conduct Authority (FCA) has also issued a warning regarding the rise of finance-oriented influencers promoting financial products to younger audiences without possessing adequate knowledge about the products they endorse. The regulator expressed concerns about the potential risks this trend poses to consumers and the broader financial market.
According to the FCA’s statement, influencers engaged in such practices could be subject to legal consequences, including imprisonment of up to two years, an unlimited fine, or both. Notably, this law extends to promotions originating from outside the UK that could still have an impact on the country’s residents.
The warning comes as the UK regulator cited a report revealing that over 60% of individuals between the ages of 18 and 29 follow social media influencers. Moreover, approximately three-quarters of those surveyed expressed their trust in the advice provided by these influencers. The combination of a trusting audience and influencers with limited knowledge of financial products has raised concerns about potential misrepresentation or inappropriate endorsements.
A 2021 the UK regulator survey highlighted that 58% of respondents aged under 40 admitted they invested in high-risk products primarily due to the hype generated by social media and traditional news sources. The watchdog has been closely monitoring this trend and its impact on consumer behavior, aiming to protect individuals from unsuitable financial decisions driven by misinformation and inadequate understanding.