UK Bans Free Promotional NFTs And Crypto Airdrops
The UK’s FCA announced stricter crypto marketing rules this week, prohibiting giving away free NFTs and cryptocurrencies to promote digital asset investing.
Earlier this week, the United Kingdom’s Financial Conduct Authority (FCA) introduced tighter advertising rules for the crypto industry, which will take force on October 8. Giving away free NFTs (non-fungible tokens) and cryptocurrencies via airdrops to encourage users to invest in digital assets will no longer be allowed.
Matthew Long, the FCA’s director of payments and digital assets, told media publication CoinDesk, that frequently these NFTs and airdrops when used as promotional products, result in consumers buying crypto that they realise “can be problematic later.”
Long added that NFTs and airdrops will not be banned, merely promotions involving them.
FCA Classifies Crypto As “Restricted Mass Market Investment”
The FCA’s newly published rules categorise crypto as a “restricted mass market investment” and will require firms promoting crypto products or services to introduce clear risk warnings. The regulator also said “refer a friend” bonuses incentivising the public to invest in cryptocurrencies will be banned. The new rules will require a “cooling-off” period for first-time investors to discourage impulsive crypto purchases.
Research by the FCA reveals that estimated crypto ownership has more than doubled from 2021 to 2022, with 10% of the 2,000 people surveyed indicating that they own cryptocurrencies.
Sheldon Mills, executive director of Consumers and Competition at the FCA, said:
It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.
Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.
FCA Goes Ahead With Tighter Rules Despite Industry Pushback
The FCA consulted on its proposed marketing rules in 2022 and found that respondents largely disagreed with rules such as banning incentives, blocking new investors from getting non-real-time promotional offers (DOFP) and treating crypto as a mass market investment.
As it stands, only entities that have received authorisation from the FCA can approve their own advertisements. Given that there is no framework currently in place that allows the FCA to authorise crypto firms fully, the government has created a temporary exemption that will enable crypto firms registered with the FCA to comply with its AML requirements to approve their own advertisements starting in October.
The measure, as stated, is only temporary, and eventually, only FCA-authorised entities will be permitted to approve ads. Some industry players, however, caution the requirement may be too restrictive.
The FCA will go forward with the above measures despite industry pushback.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
