The Financial Conduct Authority (FCA) in the UK is intensifying its efforts to regulate the cryptocurrency sector, issuing alerts to unregistered exchanges and pursuing legal action against businesses serving UK residents or promoting digital assets within the country.
In October, the FCA issued hundreds of warnings against unauthorized crypto exchanges, including Elite Bit Markets, Nexure Gainbit, Plux Crypto, and HTX.
On Tuesday, the agency filed a lawsuit against HTX for offering crypto services to UK residents, as confirmed by an FCA spokesperson to Cointelegraph. The FCA also stated:
“We have observed crypto firms responding positively to our financial promotions rules and regulations; however, we will not hesitate to take action against firms that appear to be violating our rules.”
Crypto businesses must register with the FCA under money laundering regulations and adhere to the UK’s financial promotions rules, which were implemented in 2023, in order to advertise or offer services to residents.
The UK’s increased examination of crypto companies coincides with regulators easing restrictions by lifting the ban on crypto exchange-traded notes (ETNs) and publishing a roadmap for tokenized investment funds, seeking to remain competitive with crypto-friendly nations like the US.
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The UK enforces strict regulations on crypto companies advertising services
Crypto companies promoting in the UK must comply with stringent criteria to run crypto-related advertisements or endorse digital assets within the country, focusing on consumer risk protections.
The FCA classifies financial instruments into three risk categories, starting with Readily Realizable Securities (RRS), which include publicly traded companies and are considered to have the least risk, with no marketing restrictions.
The Restricted Mass Market Investments (RMMI), which encompasses most cryptocurrencies, are deemed by the regulator to have a medium risk profile, allowing these investments to be marketed to the public under strict consumer protection measures.
These regulations include conspicuously displayed warnings regarding speculative risks, directing users to informational pages and additional prompts designed to inform the user, along with mandatory know-your-customer requirements.
Restrictions also limit the types of compensation or incentives offered to consumers to encourage the use of specific exchanges or services.
Executives at crypto firms that breach the UK’s advertising regulations may face up to two years in prison and other legal penalties.
Nonetheless, these strict repercussions haven’t deterred crypto advertisements in the country, according to the Financial Times.
The publication noted that nearly half of all crypto advertisements flagged by the FCA between October 2023 and October 2024 remained active despite the warnings.
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