According to CoinDesk, the free gifting of non-fungible tokens (NFTs) or cryptocurrencies through airdrops (a marketing activity usually carried out by crypto startups) to promote investment will be banned after new UK Financial Conduct Authority (FCA) regulations came into force.
According to a report released by the FCA, the new regulations will take effect on October 8. Cryptocurrencies will be classified as “restricted mass-market investments” and require advertisements for digital currencies to include a clear risk warning. Furthermore, incentives to encourage the public to invest in cryptocurrencies will be banned.
Airdrop is the act of giving away tokens from a project to the community. Usually, crypto companies will use this strategy to promote new projects and attract potential investors. This has been an effective marketing method for crypto projects in recent years
There have been many crypto companies and celebrities that have introduced free NFTs to customers and fans, many projects have also launched crypto airdrops for promotional purposes.
FCA’s director of payments and digital assets Matthew Long said that using NFTs and free cryptocurrencies can expose users to risky purchases of cryptocurrencies.
According to the FCA, when it consulted with marketing regulations last year, respondents largely disagreed with proposals such as banning incentives, treating cryptocurrencies as a mass-market investment, and blocking new investors from receiving real-time promotional offers (DOFP).
Only organizations authorized by the FCA may self-approval of their own advertising. As there is currently no regime that allows the FCA to fully authorize crypto companies, the government has facilitated a temporary exemption for crypto companies registered with the FCA.
Mr. Long said the FCA had listened to contributions to create “the safest set of regulations possible”, noting that the FCA’s registration regime has a high standard for anti-money laundering and safety regulation. Since January 2020, the FCA has received 318 cryptocurrency applications and 41 crypto companies have completed the registration process with the agency. FCA has faced some criticism from companies over its lengthy registration procedures.
“The crypto industry needs to prepare now for this important change,” said Sheldon Mills, executive director of the consumer and competition division at FCA. According to Cointelegraph, the regulator is working on additional guidance to help companies meet regulations.
Under the new rules, crypto companies are obliged to verify that investors have the necessary knowledge and experience to participate in crypto investments. Furthermore, cryptocurrency advertisers must provide transparent risk warnings and ensure their advertising is fair, clear, and free of any misinformation