According to a report published by the FCA, the new regulations will take effect on October 8th. Cryptocurrencies will be classified as “restricted public market investments” and advertisements for cryptocurrencies will be required to include clear risk warnings. Furthermore, incentives to encourage public investment in cryptocurrencies will be prohibited.
An airdrop is a project that distributes tokens to the community. Typically, cryptocurrency companies use this strategy to promote new projects and attract potential investors. This has become an effective marketing method for cryptocurrency projects in recent years.
Using free NFTs and cryptocurrencies can lead users to purchase risky types of digital currency.
Many cryptocurrency companies and celebrities have introduced free NFTs to customers and fans, and many projects have also launched cryptocurrency airdrops for promotional purposes.
Matthew Long, Director of Payments and Digital Assets at the FCA, said that using free NFTs and cryptocurrencies could lead users to purchase risky types of digital assets.
According to the FCA, when consulted on marketing regulations last year, respondents largely disagreed with proposals such as banning incentives, treating cryptocurrencies as an investment in the public market, and blocking new investors from receiving non-real-time promotional offers (DOFP).
Only organizations authorized by the FCA can self-approve their own advertisements. Since there is currently no regime that allows the FCA to fully authorize cryptocurrency companies, the government has provided temporary exemptions for cryptocurrency companies already registered with the FCA.
Mr. Long said the FCA has listened to feedback to create "the safest possible regulations," stating that the FCA's registration regime has high standards for anti-money laundering and secure governance. Since January 2020, the FCA has received 318 cryptocurrency applications, and 41 cryptocurrency companies have completed the registration process with the agency. The FCA has faced some criticism from companies regarding its lengthy registration procedures.
Sheldon Mills, executive director of the consumer and competition division at the FCA, said the cryptocurrency industry needs to prepare now for this significant change. According to Cointelegraph , the regulator is studying additional guidance to help companies meet the regulations.
Under the new regulations, cryptocurrency companies are obligated to verify that investors possess the necessary knowledge and experience to participate in cryptocurrency investments. Furthermore, those advertising cryptocurrencies must provide transparent risk warnings and ensure their advertisements are fair, clear, and free from any misinformation.
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