UK’s FCA targets cryptocurrency memes

The Financial Conduct Authority (FCA) of the UK aims to stop the unlicensed financial promotion of cryptocurrency memes and other non-compliant assets on social media. A whitepaper outlining stringent rules that must be observed when promoting such cryptocurrencies on social media was published by the regulator two days ago. Memecoins like PEPE, SHIB, and DOGE are they in danger?

The UK’s FCA has suggested stringent rules for the issue of marketing crypto memes

The Financial Conduct Authority (FCA), which just announced the new guidelines in the area of social media dissemination, has warned influencers that they are taking a great risk by promoting their preferred shitcoin, so crypto memes are no longer seen favorably in the United Kingdom.

The UK regulator is concentrating in particular on non-compliant financial promotion of cryptocurrencies like memecoins, which could be risky for the final investor.

Cryptocurrency memes on Twitter and Reddit that specifically encourage users to buy these financial instruments violate the Financial Services and Markets Act 2000 and are punishable by unlimited penalties and up to two years in prison.

To keep within UK advertising rules, content mentioning cryptocurrencies like PEPE, SHIB, or DOGE must include relevant disclaimers.

The FC will also ban “invite a friend” exchange benefits on October 8, 2023. Cryptocurrency trading platforms must include clear warnings about the risks and a 24-hour cooling-off period for inexperienced investors.

The federal government added that these restrictions apply to foreign communications and recruitment that affect the UK.

The most intriguing thing to note is that the meme itself, which is a component of social media’s entertainment logic, can be viewed as an act akin to financial promotion and is therefore illegal.

In this context, the FCA offered a meme example (shown in the picture) that exemplifies a certain category of non-complimentary investment advice.

Overall, these stringent regulations aim to prevent the rise of crypto memes and extremely volatile cryptocurrencies, which could be harmful to less experienced investors. The future of memecoins, which rely heavily on social media “shilling” activities, may be seriously hampered by all of this.

Director of Consumer Investments at the FCA Lucy Castledine commented on the news as follows:

 ‘We’ve seen an increasing number of ads that don’t live up to the guidelines we have in place to stop consumer harm. We want people to be on the right side of our rules, so we are updating our guidance to clarify what we expect from companies when they market financial products online. And for those who promote products illegally, we will take action against you.”

Influencers’ role in pushing memecoins

The figure of the influencer is clearly important in what is known as “shilling,” or the practice of pressuring one’s audience to consider investing in these products by convincing them that there are opportunities, in the delicate setting of crypto memes.

Influencers who promote memecoins may occasionally receive compensation from the company that created those tokens, but they may also do so unpaid in order to obtain indirect benefits, such as increasing the value of a low-capitalization currency with low trading volumes.

Influencers will now need to exercise greater caution in both situations as a result of the FCA’s new guidelines, which is intended to discourage this kind of behavior.

The organization acknowledged the rising prominence and frequency of online financial advertising run by influencers, or as another word for them refers, “finfluencers,” that have the potential to deceive investors.

According to the agency,

“We have seen financial promotions communicated on chat rooms such as Reddit and Telegram, often using memes to advertise specific investments. Chat room or forum users should be aware that financial promotions on these channels will still be subject to the financial promotions restriction.”

The watchdog established several goals in its 2023–2024 business plan with the intention of lowering and preventing violations of the Markets Act 2000, which led to the creation of the new guidelines on specific behaviors on social media platforms like Twitter and Reddit.

The FCA and the Advertising Standards Authority have also teamed up to help inform consumers and influencers about the dangers of this activity. The project entails publishing a number of infographics, organizing roundtable discussions, and holding live events to raise awareness of the risks and potential sanctions.

Influencers will now need to exercise more caution while encouraging the purchase of cryptocurrency memes like PEPE.

Big Tech firms will also have to make a commitment to just using authorized marketing and promotions in order to ultimately protect the consumer.

Concentrating on PEPE, SHIB, and DOGE are the hazards to the cryptocurrency meme market

Strict regulation, like the one the FCA has suggested regarding social scope communication for crypto memes, could be detrimental to this specialized sector.

This regulatory closure could be imitated by regulators in other nations, posing significant dangers for memecoins in the sector, even though the guidelines are only intended to apply to financial promotions that are in effect in the UK.

As was already noted, the majority of these currencies thrive in the cryptocurrency market mostly as a result of the publicity they receive on social media.

Meme-based cryptocurrencies, especially those with lesser capitalization, may find it difficult to replicate their current success without the typical influx of promotional strategies that encourage people to buy.

The three iconic meme crypto assets, PEPE (+0.57% over the previous 7 days), DOGE (+5.47%), and SHIB (+2.42%), do not currently appear to have been impacted by the news at their current price levels.

These coins may not be impacted by the risks specified by the FCA since they have already won the community’s approval and attained a high level of notoriety.

On the other hand, considering the challenges of getting interaction without the aid of influencers and promotion strategies like shilling, this all poses a really major dilemma for nascent memecoins.

If there are no more deceptive advertisements and shitcoin promotions by armies of people on social media, Twitter and Reddit audiences may focus on other, more pressing issues and avoid getting sucked into a plethora of cryptocurrencies with no intrinsic value.

It would be beneficial to have a lot more instructional content available that is capable of conveying information, rather than having the homepages of social platforms filled with financial advice.