A crypto industry group in the U.K. is concerned that a proposed ban on incentives could drive businesses out of the country.
The Financial Conduct Authority (FCA) in June published its planned regulatory regime for crypto advertisements and promotions for public comment. The regulator proposed a ban on crypto incentives. The distribution of free non-fungible tokens (NFTs) and airdrops as incentives to encourage investment would be banned under the new regime, the FCA told CoinDesk at the time. The new promotions regime is set to take effect on Oct. 8.
“Whilst members acknowledge that the rules have been extended to the crypto asset industry to minimize consumer detriment, the FCA should keep in mind that certain aspects of the rules (such as incentive bans) may make it challenging for firms to be commercial and competitive and may cause the unintended consequence of forcing firms to move their operations out of the U.K.,” said lobby group CryptoUK in response to the FCA’s proposals on Wednesday.
The government passed a financial markets bill into law in June that brought crypto promotions into the FCA’s remit and the watchdog has since said it aims to treat risks with the appropriate regulatory approach.
“Crypto remains high-risk and the new rules are aligned with the existing rules for promoting other high-risk investments. We’ve conducted extensive consumer research, behavior testing and considered responses to both our discussion and consultation paper on the matter,” an FCA spokesperson said in an email to CoinDesk. “These rules are designed to be proportionate, evidence-based and strike the right balance between protecting people and enabling sustainable innovation in the sector.”
More clarity on guidance
Though the lobby group generally agreed that crypto adverts should be “fair, clear and not misleading,” as the FCA sets out, it said the regulator’s guidance on the rules needed more clarity.
CryptoUK members asked for more clarity on what counts as a financial promotion, what promotions activities outside the U.K. would be monitored, and if the FCA will set out what other jurisdictions’ laws would be equivalent to its own so that international companies don’t have to adjust to the new ad rules, the letter said.
“The guidance is limited in nature and does not take into account the specific nuances related to qualifying crypto assets and how these products are marketed through different channels,” CryptoUK said in its letter. “We consider the guidance should be expanded and provide more detailed examples that set out FCA’s expectations along with how it applies to the crypto asset market.”
The lobby group also said that the term “qualifying crypto assets” is open to interpretation and called for clarity on what falls into its scope.
CoinDesk has reached out to the FCA for comment.
