New Cryptocurrency Marketing Rules in Force – What Do You Need to Know?

The new rules are certainly good news for cryptocurrency investors. There are many different cryptocurrencies on offer and their value can fluctuate wildly. In the past, it has been difficult to know which firms could be trusted; many unsuspecting investors have been lured in by genuine-looking adverts, on sites like Meta’s Facebook or Instagram, promising guaranteed or high returns. Often the adverts have been placed by scammers who want to collect contact details, so they can target their victims directly.

Read more about cryptocurrency scams here and learn how to spot the signs of one here.

As the promotion of crypto assets usually appears on websites, in printed literature, or through social media posts and online adverts, the following firms are all expected to take note of the FCA’s warnings issued and take steps to protect consumers:

• Crypto businesses
• Social media platforms
• App stores
• Search engines
• Domain name registrars
• Payment firms

Marketing materials must be clearly labelled with risk warnings so that would-be investors can assess whether the investments are suitable. And crypto firms will no longer be able to offer incentives such as referral bonuses. Similar changes were implemented by the FCA in August 2022 in relation to other high-risk (non-crypto) investments.

Many unregulated firms are based overseas. Some companies, including one called Bybit, have already stopped offering services in the UK, in an attempt to stay on the right side of the FCA’s guidelines. Bybit is also encouraging UK investors to wind down their investments by 8^th January 2024, the end of a transition period put in place by the FCA for firms to make the necessary changes to how they work. Disappointingly, a significant number of other cryptocurrency firms contacted by the FCA failed to engage with them in the months leading up to 8^th October.

The penalties for not complying with the new regime are significant. The FCA has confirmed that any unregistered firm or individual continuing to promote crypto assets could be subject to up to 2 years in prison, an unlimited fine, or both.

Sarah Spruce, who heads up the Fraud and Scams team at TLW Solicitors, welcomes the news and says:

“Many people see investing in cryptocurrency as the ‘next big thing’ and hope to ‘get rich quick’. Unfortunately, we are contacted by victims of crypto fraud on a regular basis after they realise they have been duped and their money has disappeared. These new rules mean that investors have more protection through the financial services regulator, the FCA. That in turn opens the doors to getting help from the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS) if things go wrong. FOS was set up over 20 years ago to settle disputes between customers and regulated financial firms and the FSCS is there to support people financially if their FCA-registered financial provider goes out of business. Previously, there was very little protection for crypto investors and little hope of recovering any lost money.

“If you or a loved one have lost money as a result of a suspected crypto scam, please get in touch with TLW Solicitors and we’ll discuss your case, including whether there is the basis of a ‘no win, no fee’ claim. These are challenges that fraud victims should not have to deal with alone.”