UK Watchdog Targets Finfluencers and Crypto Memes

UK Financial Conduct Authority (FCA) proposes to bring crypto memes and financial influencers (finfluencers) in compliance with the local advertising laws

UK Watchdog Targets Finfluencers and Crypto Memes

On Monday, July 17, the Financial Conduct Authority (FCA) of the UK released a proposed guidance on social media financial promotions. The new rulebook aims to include financial advice given by influencers and crypto memes they post into the category of “financial promotions” regulated by the agency.

The core issues addressed by the new proposal

The regulator is concerned about a significant increase of financial influencers, aka ‘finfluencers’, promoting financial products without due diligence. This category of social media advertisers particularly focuses on investment and credit products with high-risk degrees. Therefore, when such ads fall short of the legal guidance, much consumer harm can occur.

Besides, their appeal and influence mainly target young, financially inexperienced audiences. They tend to trust social media influencers rather than traditional banking experts, often falling for scams and illegal financial services. Last year, a survey of 1000 Gen Z respondents from the UK showed that 58% of British youth aged 18-24 follow TikTok influencers who talk about budgeting, money, or personal finance.

Moreover, 40% of those sticking to social media finance channels believe that influencers give better advice than traditional media. That is far from being true. In fact, as FCA notes many influencers “have little knowledge of what they’re promoting,” simply being hired by a financial provider to advertise their services and products. Therefore, many finfluencer-led promotions are either illegal or non-compliant, featuring poor quality information and lack of disclosure.

Speaking of high-risk investments promoted in social media, the regulator specifically focuses on cryptocurrencies. FCA wants to broaden the scope of what is considered a promotion when related to crypto assets. The regulator claims that all types of public communication that come from the virtual asset provider (including crypto memes) are subject to FCA rules. At the same time, social media users often don’t realise such posts should comply with the financial promotion regime as well.

What is going to change?

To stay compliant with the latest version of advertising laws in the UK, crypto firms and financial influencers might have to place disclaimers on their promotions and memes, mentioning the risks of proposed investment choices.

Furthermore, advertisers of all kinds will have to make sure UK consumers who click a link on financial promotion are not directed to non-UK (meaning not FCA-regulated) entities without their awareness. To reach this goal, the regulator advises finfluencers and crypto promoters to have a separate profile dedicated to UK customers or use geolocation means to track UK users and guide them to locally authorised services only.

In addition, FCA also reminded about an upcoming ban on crypto investment incentives such as refer-a-friend practices. Earlier this year, it was announced that starting 8 October 2023, firms marketing crypto assets to UK consumers will adhere to much stricter advertising rules. Those include a 24-hour cooling-off period for first time investors and clear risk warnings.

The agency noted that in Q4 2022, 69% of financial promotions on websites or social media from authorized firms were amended or withdrawn upon FCA intervention.

As the watchdog plans to spread its guidance over “all communications capable of having an effect in the UK,” YouTubers and streamers on various platforms, including newly-created Threads and private communication channels such as Discord, should be mindful of financial advice they give or investment practices they promote.

If finfluencers do not comply with the FCA rules, they may end up with up to two years in jail and unlimited fines. The law applies even to those promotions from outside the UK that could have an effect on British consumers.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.