The UK’s Financial Conduct Authority (FCA) is significantly increasing its efforts to regulate the cryptocurrency industry. This includes issuing warnings to unregistered crypto exchanges and pursuing legal action against companies that serve UK residents or promote digital assets within the country.
In October, the FCA issued hundreds of warnings to unlicensed crypto exchanges. Among those specifically named were Elite Bit Markets, Nexure Gainbit, Plux Crypto, and HTX. On Tuesday, the agency confirmed it had filed a lawsuit against HTX for promoting crypto services to UK residents.
“We have seen crypto firms react positively to our financial promotions rules and regulations; however, where we still see poor practices, we will not hesitate to take action where firms appear to be breaching our rules.”
Under current UK regulations, crypto companies are required to be registered with the FCA, adhering to money laundering regulations. Furthermore, they must comply with the UK’s financial promotions rules, which became effective in 2023. These rules govern how companies can advertise or provide services related to digital assets to UK residents.
This heightened scrutiny by the UK comes at a time when regulators in the country have also been easing certain rules. This includes lifting the ban on crypto exchange-traded notes (ETNs) and publishing a roadmap for tokenized investment funds. These moves are intended to help the UK remain competitive with other nations that have adopted more crypto-friendly stances, such as the United States.
Strict Regulations for Crypto Companies Advertising in the UK
Crypto companies wishing to advertise in the UK or promote digital assets within the country must adhere to stringent criteria. These regulations are primarily focused on consumer risk protection.
The FCA categorizes financial instruments into three distinct risk buckets. The first category, Readily Realizable Securities (RRS), includes publicly traded companies and is considered the lowest risk. The regulator states that these instruments face no marketing restrictions.
The second category, Restricted Mass Market Investments (RMMI), encompasses most cryptocurrencies. The FCA classifies these as having a medium risk profile. Investments in this category are permitted to be marketed to the public, but only under strict consumer protection guidelines.
These guidelines mandate conspicuous warnings about speculative risk. They also direct users to informational pages and include other prompts designed to alert consumers. Additionally, mandatory know-your-customer (KYC) requirements are enforced.
The regulations also place limitations on the types of compensation or rewards that can be offered to consumers to encourage them to use a specific exchange or service.
Executives of crypto companies found to be in violation of the UK’s advertising laws could face severe penalties, including up to two years in prison and other legal sanctions.
Despite these strict penalties, crypto advertisements continue to appear in the UK. According to the Financial Times, approximately half of all crypto advertisements flagged by the FCA between October 2023 and October 2024 remained online, even after warnings were issued.