The FCA has published a new handbook outlining guidance for crypto firms covering social media promotions.
The 30-page document covers the best practice for the promotion and marketing of cryptoassets.
It comes after the regulator rolled out new rules on October 8, with the intention of improving the accuracy of cryptoasset products' marketing.
The guidance claims the relatively recent emergence of crypto as an asset class means investments can be subject to new risks which retail customers may not understand.
It added: “We continue to believe that cryptoassets are high risk investments and that consumers should understand they may lose all the money they invest.”
For this reason, the FCA wants firms to promote cryptoassets in a way that consumers can make “clear, considered and informed decisions”.
It also sets out that any marketing should be clear and not misleading.
The guidance reminds firms of their obligations under consumer duty rules, which came into force in July, which means firms should act in ‘good faith’ towards retail customers and avoid potential future harm.
Where cryptoassets claim to be backed by a commodity or asset, the FCA expects firms to make clear what exactly it is, for example gold.
And to prove this, the FCA would require a firm to prove it owned the underlying commodity or asset and make clear the terms and timescales of redemption for investors.
The guidance also covers the use of social media to promote the products.
It said: “Financial promotions on social media (including those communicated by, so called, finfluencers) should disclose any relevant commercial relationships, for example if they have been paid or commissioned to promote a cryptoasset or cryptoasset service.”
It added that the rules apply to any type of communication on all social media platforms.
Lucy Castledine, director of consumer investments at the FCA, said: "While the new rules for firms marketing crypto to UK consumers are aligned with the existing rules for other high-risk investments, we’ve engaged extensively with industry and designed this guidance to specifically support crypto firms complying.
“We continuously seek industry’s input to get rules, their implementation, and the support we offer right. This guidance is no exception and we’re grateful for all the input we received during the consultation period.”
Last week, the FCA said it had already identified three common issues since the rules were introduced, which were:
- Promotions making claims about the safety, security or ease of using cryptoasset services without highlighting the risk involved.
- Unclear risk warnings due to small fonts, hard-to-read colouring or non-prominent positioning.
- Firms failing to provide customers with adequate information on the risks associated with products being promoted.
The regulator warned it will take action on firms which are not taking the new regulations seriously, including placing restrictions on firms.
tara.o'connor@ft.com
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