As the global crypto industry unfolds, new challenges have emerged, prompting regulatory bodies to adapt. Notably, the UK’s financial watchdog, the Financial Conduct Authority (FCA), recently proposed guidance suggesting that crypto companies and influencers must soon introduce disclaimers on crypto memes to comply with the nation’s advertising regulations. This revolutionary approach demonstrates the ever-evolving relationship between the cryptocurrency market, internet culture, and regulatory compliance.
Crypto Memes: The Unconventional Marketing Tool
Recently, crypto firms’ memes have flooded online platforms, often circumventing traditional advertising channels. Many internet users remain oblivious to the fact that these memes are, in fact, subject to promotional rules set forth by financial authorities. The FCA highlights the crypto sector’s reliance on these promotional memes, emphasizing that any form of communication could fall under the broad category of financial promotion.
Like many global financial regulators, the FCA sees cryptocurrency as a high-risk investment. Despite allowing crypto advertising to the general public, it insists on strict compliance with specific stipulations. These include the provision of risk warnings and a prohibition on investment incentives.
During the final quarter of 2022, 69% of financial promotions from authorized firms on websites or social media were either revised or removed due to FCA intervention.
Revising the Rules: A Consultation to Update Guidance
The FCA launched a consultation to revise its 2015 guidance in response to the changing landscape. This move aims to clarify its expectations on how marketers should enforce promotional regulations.
The FCA has observed a surge in financial influencers or “finfluencers”, who regularly endorse financial products they often know little about. These influencers primarily target a younger audience, leading to the potential dissemination of misleading information. Moreover, they often wield memes as a means to convey their message.
The watchdog has cautioned influencers that their promotions could lead to legal repercussions, including a maximum of two years in prison, an unlimited fine, or both. This legislation extends to promotions from outside the UK as long as they potentially influence the UK market.
The Influencer Trust Factor Among Young Investors
Driving the regulator’s reminder is a report highlighting the influence these figures wield over younger audiences. Over 60% of individuals aged 18 to 29 follow social media influencers, and an impressive three-quarters of this demographic trust the advice these influencers dispense.
The FCA’s 2021 survey revealed that 58% of respondents under 40 cited hype from social media and news as significant factors influencing their investments in what the regulator terms high-risk products.
In a world increasingly driven by digital media and technology, it becomes vital to implement clear and effective regulations. As the FCA seeks to establish new guidelines regarding cryptocurrency memes, the spotlight is on the crypto industry and its influencers to foster transparency and compliance.
It marks an essential chapter in the evolving narrative of cryptocurrency, regulation, and the impact of social media influencers on the financial landscape.