UK FCA Issues Another Warning on Non Compliant Crypto Firms

Key Takeaways

• The UK’s financial regulator issued new crypto marketing rules on October 8.
• Now it warns that many are deliberately skirting its new regime.
• Many firms, including Binance, have already stopped serving UK customers.

The UK government and its Prime Minister, Rishi Sunak, want the UK to become a global crypto hub. However, not everyone appears to agree, especially the UK’s Financial Conduct Authority (FCA), whose strict regulations are turning away crypto firms. 

On October 25, the country’s chief financial regulator issued yet another warning  to digital asset businesses operating in the country without proper authorization. The statement follows the 146 alerts  it issued in just the first 24 hours of new marketing rules coming into effect on October 8.

Crypto Firms Are Skirting Around Rules

According to the FCA statement, over 200 firms have received alerts for flouting the new marketing rules which came into effect earlier this month. The rules require crypto firms to either become authorized by the FCA, partner with an authorized firm or register with the FCA if operating under certain exemptions. Crypto promotions must also contain clear risk warnings and not incentive investments in misleading ways.

Despite repeated reminders about the incoming regulation, the FCA revealed that many firms  continue to market crypto assets illegally. Common violations include overstating potential gains without highlighting the risks, using small text or obscure coloring for risk warnings, and failing to provide adequate product information.

The FCA also called out authorized firms that are negligently approving non-compliant crypto promotions. As an example, on October 10, the regulator imposed restrictions  on Rebuildingsociety.com Ltd for lax oversight of crypto marketing. More actions against complicit authorized firms are expected.

This latest warning underscores the intense pressure on UK crypto companies to comply with the stricter regime. Crucially, firms worldwide marketing crypto to UK consumers also face scrutiny regardless of their location or medium of promotion.

In response, Binance and ByBit, two large cryptocurrency exchanges, have recently announced they will no longer serve UK customers. Many other smaller businesses have also followed. 

Warnings Are About More Than Compliance

Martin Cheek, managing director of UK digital compliance firm SmartSearch, agreed with the FCA sentiment. Speaking to CCN, Cheek said current marketing techniques  often overstate the safety and security of crypto assets, without adequately outlining the risks.

“Firms must understand that providing risk information is not just about ticking compliance boxes. It is about safeguarding consumers from making poorly informed decisions that could expose them to a raft of financial crimes, including both money laundering and fraud,” continued Cheek.

While the FCA continues to take a “proportionate approach” with firms acting in good faith, blatant non-compliance will trigger strong interventions. The regulator has compelled social media platforms, search engines, app stores, and domain registrars to remove illegal promotions. Payments firms have also been enlisted to limit UK consumer exposure to firms issuing illegal promotions.