On October 8th, the UK Financial Conduct Authority (FCA) imposed new marketing rules that force cryptocurrency companies to promote their products and services clearly, fairly and transparently.
From banning referral bonuses to cryptocurrency companies implementing a 24-hour cooling-off period for first-time cryptocurrency investors, the stricter FinProm regime aims to help protect consumers from the high risks associated with virtual assets.
The Cooling Off Rule, in particular, provides an opportunity for users to differentiate crypto investments and enhances the credibility of the cryptocurrency and its community, James Young, head of compliance and money laundering reporting officer at Transak, told Cointelegraph in an exclusive statement. interview. he added:
“The more regulations that are implemented, the greater the protection for consumers. I believe that safer cryptocurrencies are being realized and, in turn, their adoption is increasing on an exponential scale.”
However, given the popularity of referral bonuses as a marketing tool across different industries, the compliance head noted that other cryptocurrency companies will need more clarity on what type of incentive plans are still available.
“It was definitely a bit of a surprise,” Young admitted. “I don’t think there are any other industries that the FCA has already imposed such a strict ban on… I’m not quite sure how (the cooling-off period and incentive ban) will marry. I think it has to be proportionate.”
The new regulations come as the UK emerges as an attractive global hub for cryptocurrencies amid the ongoing regulatory crackdown in the US. But while some major cryptocurrency companies such as OKX exchange and payments platform MoonPay have already announced plans to comply with FinProm rules, the new rules have proven difficult for some players given the global scale of their operations.
Cryptocurrency exchanges Binance and Bybit, for example, have stopped onboarding new UK users to their platforms. Services provided by both will be terminated in the jurisdiction as they attempt to comply with the new regulations.
Young claims that the FCA quickly realized that the new financial promotion rules would be “extremely difficult” for firms to implement immediately in light of other rules firms must adhere to.
Related: Binance stops onboarding new users in the UK
“(Previously) we only had to comply with anti-money laundering regulations, and now these broader regulations on conduct and communication,” he noted.
In September, the Financial Conduct Authority (FCA) extended the deadline for UK-registered cryptocurrency companies to address technical issues related to the new marketing system until January 8 next year.
Uniform encryption regulations around the world
When asked about global cryptocurrency companies complying with the new FCA rules while ensuring consistent compliance and user experience in other jurisdictions, Young said there should be a separation of legal entities to seamlessly accommodate different regulatory requirements, adding that “this is something It is adhered to by the Financial Conduct Authority (FCA). It has been described as a challenge companies face, particularly those with complex group structures.” This, he says, is because:
“You have some countries that are very aggressive, like the UK, in terms of actual promotional marketing, and others haven’t really thought about what they want to do with crypto companies yet in terms of regulation.”
While acknowledging the hurdles regulators face in future-proofing regulations, Young called for regulatory uniformity in light of different cryptocurrency regimes across different jurisdictions:
“Cryptocurrencies by nature are a global thing… I would very much like to see more uniformity across the world on the part of regulators in terms of how they look at regulating cryptocurrencies… Secondly, I would really like to see more detailed guidance (on) how they are expected to… Cryptocurrency companies comply with these new regulations.”
Calls for a broader global framework for the cryptocurrency industry are not new. On October 13, the Group of 20 (G20), an intergovernmental forum of 19 sovereign nations, including the United Kingdom, unanimously approved a cryptocurrency regulatory roadmap that calls for comprehensive oversight of cryptocurrencies within and beyond the scope of the G20’s jurisdiction.
While Young believes widespread adoption of cryptocurrencies can be facilitated through regulation and trust in the industry, he noted that the FCA and other regulators must strike the appropriate balance between consumer protection and innovation.
“I welcome regulation, but it must be proportionate and balanced. It should not be designed or indirectly designed to drive companies out of the market. It must be an approach that is proportionate and fair to the emerging nature of the market and its current position.”
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