Crypto meme creators dabbling in “finfluencing” may need to think twice before letting loose another viral. The UK’s Financial Conduct Authority (FCA) is cracking down on social media content promoting financial products and services. According to the guidance consultation on financial promotions on social media, some crypto memes can be considered a financial promotion, and as such, they should inform users about the risks involved.
The document even provides an example of a meme that would fall under the proposed financial promotion regime, thus making its author or issuer responsible for non-compliance.
And here’s a comparative example of a non-compliant vs compliant social media ad related to P2P investing.
The draft guidance requires that cryptoasset firms registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs) familiarize themselves with how they can legally run crypto asset promotions. The regime has been summarized in a policy statement on the financial promotion rules for crypto assets (PS23/6), published by the FCA on 8 June this year, detailing regulations that will take effect from 8 October 2023. PS23/6 basically brings promotions of the qualifying crypto assets within the scope of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 (FSMA).
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The draft guidance in question points to the section 21 (S21) of FSMA that prohibits persons acting “in the course of business” to “communicate an invitation or inducement to engage in investment activity.” A breach of S21 is considered a criminal offense, “punishable by up to two years imprisonment, the imposition of an unlimited fine, or both.”
“We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm. 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. And for those touting products illegally, we will be taking action against you,” Lucy Castledine, Director, Consumer Investments at the FCA, said in a press release.
In recent months, the watchdog has ramped up its efforts to monitor financial promotions online, targeting notorious “finfluencers” that tout financial products, putting uninformed consumers at potential risk of money loss. The authority has also recognized the expansion of the social media scene to a variety of platforms and means of communication. FCA stresses that even promoting crypto through private and invitation-only channels, such as Discord or Telegram, falls within the scope of the new regime.
