Crypto holders brace for impact as UK financial regulator eyes ban on free promotional NFTs, crypto airdrops
|- The UK’s Financial Conduct Authority is prepared to categorize crypto as a “restricted mass market investment.”
- The FCA’s new rules, which come into effect on October 8, would ban free promotional NFTs and crypto airdrops.
- With the US SEC’s crackdown on Binance, Coinbase and a dozen crypto assets, traders brace for a prolonged crypto winter.
Most crypto projects typically offer free promotional NFTs and airdrops to attract investors. This is a common practice in NFT launches, play-to-earn tokens and the gaming ecosystem of crypto. However, the days of these practices in the United Kingdom could be numbered.
The UK’s Financial Conduct Authority (FCA) is expected to implement a new set of rules that could put an end to this type of promotion of crypto projects, according to a report published Thursday by the financial regulator.
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No more promotions for crypto investment
United Kingdom’s financial regulatory body, the FCA, is working on a set of strict financial promotions rules for crypto that will come into effect on October 8. The FCA published a report on Thursday outlining how crypto will be categorized as a “restricted mass market investment,” and will require adverts to have clear risk warnings.
Marketing crypto assets like airdrops and free promotional incentives that attract users to pour their capital into crypto will need to introduce a cooling-off period for first time investors, according to the new rules. Crypto companies and influencers have been actively involved with the marketing and promotion of free NFTs tied to the protocol’s blockchain. These initiatives are likely to cease with the implementation of new rules.
It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said in a press release.
Cryptocurrencies are largely unregulated and its trading entails a high risk, Mills said.
The crypto industry needs to prepare now for this significant change.
Double whammy for crypto holders
Crypto market participants suffered from the decline in the total crypto market capitalization, in response to the US SEC’s enforcement action on crypto exchanges. Between June 6 and 9, the overall market capitalization dropped from $1.18 trillion to $1.15 trillion, marking a decline of 2.5%.
The FCA’s stance on crypto could result in further decline in market capitalization as market participants pull out capital from risk assets.
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