The Financial Conduct Authority (FCA) in the UK is intensifying its efforts to regulate the crypto sector, issuing alerts to unregistered exchanges and pursuing legal actions against companies catering to UK residents or promoting digital assets within the country.
The FCA released hundreds of warnings against unlicensed crypto exchanges in October, including Elite Bit Markets, Nexure Gainbit, Plux Crypto, and HTX.
On Tuesday, the agency initiated a lawsuit against HTX for promoting crypto services to UK residents, as confirmed by a spokesperson for the FCA to Cointelegraph. The FCA also stated:
“We have observed crypto firms responding positively to our financial promotions rules and regulations; however, where we continue to see poor practices, we will not hesitate to take action against firms that appear to breach our regulations.”
Crypto businesses are required to register with the FCA under money laundering regulations and adhere to the UK’s financial promotions rules, which came into effect in 2023, to promote or provide services to residents.
The UK’s increased examination of crypto firms coincided with regulators in the nation relaxing rules by lifting the ban on crypto exchange-traded notes (ETNs) and unveiling a roadmap for tokenized investment funds to stay competitive with crypto-friendly countries like the US.
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The UK maintains strict regulations on crypto companies advertising services
Crypto firms advertising in the UK must fulfill strict criteria to run crypto-related advertisements or promote digital assets throughout the nation, focusing on consumer risk protections.
The FCA categorizes financial instruments into one of three risk levels, starting with Readily Realizable Securities (RRS), which includes publicly traded firms and is deemed to carry the least risk, imposing no marketing restrictions.
Restricted Mass Market Investments (RMMI), encapsulating most cryptocurrencies, are classified by the regulator as having a medium risk profile, permitting public marketing under strict consumer protection guidelines.
These include prominently displayed warnings regarding speculative risks, guiding users to informational pages and other prompts designed to enhance user awareness, along with mandated know-your-customer protocols.
The limitations also restrict the types of compensation or rewards offered to consumers to entice them to use a specific exchange or service.
Executives at crypto firms that breach the UK’s advertising regulations may face two years in prison and other legal penalties.
However, these stringent fines have not deterred crypto promotions in the country, according to the Financial Times.
The publication reported that approximately half of all crypto advertisements flagged by the FCA between October 2023 and October 2024 remained active despite warnings.
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