On Oct. 8, the United Kingdom’s Financial Conduct Authority (FCA) imposed new marketing rules compelling cryptocurrency firms to promote their products and services clearly, fairly and transparently.
From banning referral bonuses to crypto firms implementing a 24-hour cooling-off period for first-time crypto investors, the stricter Financial Promotions (FinProm) regime aims to help protect consumers from high risks associated with virtual assets.
The cooling-off rule, in particular, presents an opportunity for users to discern crypto investments and strengthens the credibility of crypto and its community, James Young, compliance head and money laundering reporting officer at on-ramp firm Transak, told Cointelegraph in an exclusive interview. He added:
“The more regulations that come through, the more protection there is for consumers. I think the safer crypto is perceived and, therefore, adoption is increased on an exponential scale.”
However, considering the popularity of referral bonuses as a marketing tool across different industries, the compliance head noted that other crypto firms would need more clarity on the kind of incentive schemes still available.
“It certainly did come as a bit of a surprise,” Young admitted. “I don’t think there are any other industries that the FCA has really imposed this very strict ban on like that… I’m not quite sure how the [cooling-off period and ban on incentives] marry up. I think it needs to be proportionate.”
The new regulations come as the U.K. emerges as an attractive global crypto hub amid the ongoing regulatory crackdown in the United States. But while some major crypto firms such as exchange OKX and payments platform MoonPay have already announced plans to comply with FinProm, the new rules proved to be difficult for some players given the global scale of their operations.
Crypto exchanges Binance and Bybit, for instance, have halted the onboarding of new U.K. users to their platforms. Services from both in the jurisdiction will wind down as they attempt to comply with the new regulations.
Young claims that the FCA soon realized that the new financial promotion rules were going to prove “very challenging” for firms to instantly implement in light of the other rules companies should comply with.
“[Before] we just had to comply with anti-money laundering regulations to now these broader brush regulations around conduct and communication,”…