Financial Conduct Authority (FCA) Cautionary Notice: Crypto Memes May Breach Financial Promotion Regulations
The Financial Conduct Authority (FCA), the top financial regulator in the United Kingdom, has warned that crypto memes may be considered criminal offenses if they do not comply with existing financial promotion rules. The FCA’s proposed guidelines state that any form of communication can be seen as a financial promotion and is subject to Section 21 of the Financial Services and Markets Act, which prohibits the invitation or inducement of others to engage in investment activity. The FCA pointed out that memes are particularly prevalent in the crypto asset sector and that users often do not realize they are subject to the regulator’s rules.
Memes have become a central part of the crypto industry, especially for young people, and are how many in the industry communicate online. Major cryptocurrencies like Dogecoin have gained popularity primarily due to the memes associated with them. However, the FCA has previously stated that it would need new authorities from policymakers before it could independently take action against meme-driven advertising campaigns.
To illustrate their point, the FCA provided an example of a non-compliant crypto ad that encourages viewers to spend their money on crypto instead of groceries. The regulator has published final rules and proposed guidance on how the financial promotion rules apply to crypto firms and what they should consider when communicating financial promotions.
UK regulators have been praised by crypto firms such as Coinbase for providing more legal clarity compared to their US counterparts. Coinbase CEO Brian Armstrong has even considered moving the company’s headquarters to the UK if it cannot find legal footing in the US. Last month, lawmakers in the UK passed the Financial Services and Markets Bill, granting regulators the authority to develop a tailored framework for digital assets.
Overall, the FCA’s warning indicates that crypto memes must comply with existing financial promotion rules, and firms in the crypto sector should be aware of the guidelines set forth by the regulator. Failure to comply may result in criminal offenses.