UK’s Forthcoming Cryptocurrency Advertising Regulations Raise Concerns in the Industry

“Regulatory Scrutiny on Approving Promotions for Unregistered Crypto Firms Prompts Upcoming Permissions Requirement”

UK’s Forthcoming Cryptocurrency Advertising Raise Concerns in the Industry

Unregistered cryptocurrency firms seeking to serve clients in the U.K. face the challenge of depending on other companies to approve their local communications. These advertising approvers are now under increased regulatory scrutiny and will soon be required to obtain new permissions.

The stringent new regulations regarding crypto advertising in the U.K. have led to a rush, and sometimes a struggle, for companies to ensure compliance. Furthermore, additional rules for ad approvers suggest more difficulties for companies aiming to attract local customers.

The local regulatory authorities mandate that firms must be registered in the country’s crypto register to be able to approve their own communications. Alternatively, they can have their ads approved by authorized firms. While this may seem straightforward, it’s far from easy to find firms with the necessary authorizations. For instance, Binance exchange had partnered with a U.K. company called Rebuildingsociety.com for the approval of its promotions. However, in October, the U.K. financial watchdog imposed new restrictions on the local firm, limiting its ability to approve crypto-related communications. Consequently, Binance announced that it would not onboard any new U.K. clients until it finds an authorized ad approver.

As of now, up to 10 crypto businesses, including Coinbase and OKX, are relying on the exchange platform Archax to approve their advertisements in the U.K. However, even Archax’s future as a crypto advertising approver is uncertain. Archax can only grant temporary approval for crypto ads on behalf of other companies while it applies for permission from the Financial Conduct Authority (FCA) to continue this practice. The application process can begin within three months starting from November 6. If the regulator rejects Archax’s application, companies relying on its services for ad approvals will need to seek alternative compliance methods.

Simon Barnby, Archax’s Chief Marketing Officer, mentioned, “Everyone is in the same state as us. We’re all applying, and we’re all allowed to provide the service while we apply. If, at the end of it, someone’s application is successful, that’s positive. If it’s not, they would have to cease providing the service.”

Authorization not enough

UK's Forthcoming Cryptocurrency Advertising Regulations Raise Concerns in the Industry
UK’s Forthcoming Cryptocurrency Advertising Regulations Raise Concerns in the Industry

Archax, an early entrant onto the FCA crypto register in 2020, had received authorization from the regulator to operate as an exchange, broker, and custodian for both tokenized and traditional assets. However, despite having this authorization, it became evident that being an authorized entity alone wasn’t sufficient, as seen in the case of Binance’s ad approver, Rebuildingsociety.com. In October, the FCA informed Rebuildingsociety.com that it could no longer approve crypto advertisements, even though the company was authorized by the FCA. The regulator’s decision was justified as a measure to enhance consumer protection.

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The challenge of determining which entities possess the necessary authority to facilitate crypto firms’ communication with U.K. clients is just one aspect of the struggles faced by unregulated platforms that have historically operated with a relatively high degree of freedom across various jurisdictions. The FCA is closely monitoring compliance and has issued warnings about around 221 crypto platforms since the new advertising regulations came into effect on October 8.

Furthermore, the FCA is exerting pressure on ad approvers. In a recent notice, it cautioned approvers to expect enforcement actions if they fail to identify “common issues” such as illegible or inadequate risk warnings in advertisements.

New permissions

UK's Forthcoming Cryptocurrency Advertising Regulations Raise Concerns in the Industry
UK’s Forthcoming Cryptocurrency Advertising Regulations Raise Concerns in the Industry

Companies responsible for approving cryptocurrency advertisements on behalf of other firms are now required to apply for new permissions from the FCA. To secure these permissions, companies must demonstrate their expertise in approving promotions for cryptocurrency-related businesses and provide evidence of the resources at their disposal to carry out this task, as outlined by the regulator.

Nick Donovan, the Chief Revenue Officer at Archax, emphasized that this is a resource-intensive undertaking. Nevertheless, he noted that they have been expanding their team to accommodate the growing demand from clients and are in the process of preparing their application for the new permissions.

Once companies submit their applications, they can continue to approve communications for other businesses. However, their ability to do so will be contingent on receiving a positive decision from the FCA. In cases where the FCA refuses an application or grants permissions that do not cover specific product types for which approval was sought, the company in question will be required to cease the relevant S21 approval activities, as communicated by the FCA in September.

Source: www.coindesk.com

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