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The Financial Conduct Authority (FCA) in the UK has identified a potential new area of regulatory concern: cryptocurrency memes. The financial watchdog warned that non-compliant crypto memes could not only violate financial promotion rules, but could also lead to criminal offences.
Too many people across the UK are receiving financial promotions from inappropriate sources.
— Financial Conduct Authority (@TheFCA) July 17, 2023
In a set of proposed new guidelines on July 17, the FCA referenced a meme pitting the difficulties of spending traditional money against the ease of cryptocurrency transactions. The agency sees potential for misleading implications in such memes, reminding businesses that all forms of communication can fall under financial promotion rules, in particular section 21 of the Services and financial markets :
“The use of memes in promotions is particularly prevalent in the crypto-asset industry. Figure 7 is an example of a crypto-asset meme that would be subject to the financial promotion regime.
The law provides criminal penalties for violations, including a maximum of two years in prison, unlimited fines, or both. Importantly, “financial promotions communicated from outside the UK, but which are likely to have an effect in the UK, fall within the scope of the scheme”.
These guidelines were released on July 5, stating that those who promote crypto should change their messaging or seek regulatory approval by October 8, 2023.
Memecoin initiatives could be affected, which rely heavily on memes for promotion. To comply with advertising regulations, they may need to incorporate disclaimers into their memes.
Another target of the FCA’s new guidelines are social media “finfluencers”, or people who promote financial products, especially investment and credit products, through their social media platforms.
The FCA clarified that influencers, especially those operating on platforms like Reddit and Telegram, could breach financial promotion restrictions, whether for direct compensation or explicit commercial interest:
“We want unauthorized influencers to think carefully before promoting financial products or services and to understand their obligations when advertising through their social media channels. Promoting a regulated financial product or service without the approval of a person authorized by the FCA, or providing financial advice without the authorization of the FCA, may be a criminal offence.