On October 8, a new financial advertising regime for cryptocurrencies came into effect in the United Kingdom. How have companies in the crypto industry been adapting to this new regulatory framework?
The United Kingdom is preparing to become a new global financial hub for digital assets, which recognises the disruptive potential of cryptocurrencies and moves towards innovation, facing the digital future.
To achieve this, the country is building a regulatory environment that fosters the development of digital assets, but also ensures financial stability and guarantees the protection of retail investors.
In line with this objective, a new advertising regulation targeting cryptocurrencies came into force in the United Kingdom last month, the aim of which is to prevent the risk that investors may face when investing in this asset class.
Although the UK's Financial Conduct Authority (FCA) recognises that investors are the ones who decide whether or not to invest in cryptocurrencies, the new Regulatory regime for financial promotions for cryptocurrencies encourages companies in the industry to disclose the risk involved in investing in these digital assets, requesting that companies present their cryptoasset products and services as clearly and transparently as possible, so that investors can make more effective decisions based on fair and accurate information.
The authority highlights that the new advertising rule for cryptocurrencies in the United Kingdom lays the foundation for companies in this emerging industry take a holistic approach when considering the ways in which they present and promote their digital asset products and services to consumers in the country.
Companies comply with the rule and limit cryptocurrency promotions to investors in the United Kingdom
Cryptocurrency firms have been preparing to comply with the UK’s new financial promotions regime, ahead of its coming into force in October.
For instance, Paypal pauses cryptocurrency sales in the UK until early 2024, in order to adapt to the new advertising rule in force for crypto assets in the country. The company reported in August that its clients in the United Kingdom can still hold cryptocurrencies in their accounts, despite the announced measure.
Likewise, cryptocurrency exchange platforms, which operate around the world, adopted measures to block their websites to UK consumers.
The new financial promotion regime for cryptocurrencies in the country establishes that companies with a global structure must take care of the scope of the campaigns and marketing strategies that are focused on investors abroad, so as not to violate the current regulations on the matter within the territory.
According to the FCA, cryptocurrency financial promotions do not necessarily have to be directed at UK investors in order to be effective for them. For this reason, the authority suggests that cryptocurrency companies and exchanges, set a geoblock and other appropriate controls, preventing UK users from accessing cryptocurrency products and services that are not designed to be promoted or sold in the UK.
Likewise, several cryptocurrency service platforms have also installed eye-catching warning signs on their websites, which invite their users and visitors to take the time to learn about and analyze the potential risks they face when investing in cryptocurrencies.
The measures established by the FCA are already being adopted by the More than 50 companies providing services of cryptocurrencies in a regulated manner in the country, according to the authority. However, many of these also face compliance challenges, precisely because they operate their cryptocurrency businesses globally.
Regarding this situation, Matt Sullivan, from Moonpay, said that the platform is committed to complying with the new advertising regime of the United Kingdom, but that currently fighting to ensure compliance of all these new requirements, so a "settling time" is necessary to apply updates to your products locally, implement new processes and even educate your staff.
Likewise, other cryptocurrency companies, such as KuCoin, Huobi and Rebuildingsociety, also had difficulties in applying the new rules applied by the United Kingdom. The latter, associated with Binance, is restricted from issuing cryptocurrency advertisements in the country, while KuCoin and Huobi appear on a warning list of unauthorized companies of the FCA, along with 12.000 other companies and businesses.
UK cryptocurrency advertising rule aligns with ASA
On the other hand, the guidelines established in the current advertising standard for cryptocurrencies are aligned with the compliance notice issued by the UK Advertising Standards Authority in the first quarter of 2022, stating that cryptocurrency companies should not claim or imply that investment decisions in digital assets “are trivial, simple, easy or suitable for anyone.”
The ASA's enforcement notice also stated that cryptocurrency promotions should not imply a sense of urgency to buy cryptocurrency, nor should they involve messaging that makes investors think they could miss out if they do not buy at a given time.
According to the authorities, all these guidelines will help to ensure investors a safe and secure environment. Safe and informed exposure to cryptocurrencies and will contribute to creating a clear and fair regulatory regime, which incentivizes cryptocurrency companies to invest, innovate and grow in this country.
UK declares cryptocurrency trading legal
Trading cryptocurrencies in the UK is completely legal from the 29 June, when the regulations governing financial activities with cryptocurrencies in the nation received approval from King Charles III. Since then, cryptocurrencies are recognized as financial instruments, products or regulated investments throughout the national territory.
On the other hand, the UK Financial Services and Markets Act also recognizes stablecoins as regulated means of payment in the country, so these digital assets can be used as payment currencies and value exchange.
The passing of this law in the United Kingdom marked a significant milestone for the recognition of cryptocurrencies, both in the country and globally.
From its website, the UK government stressed that the law in question is fundamental to your vision to build a clear regulatory environment that will enable the cryptocurrency economy to grow and create a new, open, sustainable and technologically advanced financial services sector.
Rishi Sunak, the current Prime Minister of the United Kingdom, expressed in one of his speeches that cryptocurrencies will help the United Kingdom to stay at the forefront of technological innovation and financial.
Like the UK, other jurisdictions such as Hong Kong, Dubai and Singapore are opening up to the opportunities represented by digital assets and the crypto industry in general.
Continue reading: Will the UK become the next oasis for the crypto industry?
