UK’s Financial Regulator Struggles to Tackle Illegal Crypto Ads Despite New Powers

​The UK's Financial Conduct Authority (FCA) is facing challenges in enforcing its recent crackdown on illegal cryptocurrency promotions, with nearly half of all banned crypto adverts still active online, according to data obtained from a freedom of information request. While the regulator has issued over 1,700 takedown notices from October 2023 to October 2024, it appears that only 54% of the flagged content has been successfully removed from platforms.

The FCA's new regulatory framework, which requires crypto ads to be pre-approved by the authority or an FCA-authorized firm, was introduced to curb the rising number of misleading or fraudulent crypto schemes. The rule mandates that all crypto-related advertisements, including those for apps and websites, must be authorised before they can be published online. Non-compliance could result in legal penalties, including fines or criminal charges.

Despite these strict regulations, the FCA has yet to impose any fines or initiate criminal proceedings under these new powers, raising questions about the effectiveness of the regulatory framework. Industry insiders suggest that while the FCA has issued a large number of notices, the lack of immediate legal consequences for non-compliant companies may be contributing to the continued presence of illegal crypto promotions on the internet.

Instead of taking swift enforcement actions, the FCA has primarily focused on holding individual influencers accountable for promoting unauthorized financial products. This strategy has included prosecuting "finfluencers" — individuals with substantial social media followings who promote high-risk crypto schemes. For example, the FCA recently took legal action against nine influencers, including former reality TV stars, for their involvement in promoting unregistered derivative schemes on platforms like Instagram.

The effectiveness of the FCA's takedown notices is another area of concern. A breakdown of the FCA's monthly activities reveals that while the regulator has issued numerous takedown requests, only around half of the flagged crypto ads were removed. This uneven enforcement has prompted calls for stronger measures to ensure compliance.

Charles Randell, the former chair of the FCA, emphasized that a more robust enforcement approach is essential to curb the rise of non-compliant crypto promotions. He argued that unless there is a real threat of legal action, both the platforms hosting these ads and the crypto firms behind them would continue to evade meaningful consequences. Randell pointed out that while voluntary agreements with major tech firms such as Google and Meta have been made to ban unauthorized crypto ads, these measures remain insufficient without a consistent enforcement framework.

The FCA has made progress in its dealings with tech giants to restrict the circulation of unauthorized financial ads. However, these agreements are still voluntary and not backed by mandatory legal requirements. The regulator continues to rely on negotiations with platforms like Google and Meta, rather than exercising the full extent of its powers to remove non-compliant content.

In the meantime, legal experts, such as Tim Fosh from law firm Eversheds Sutherland, suggest that the FCA's current approach, which focuses on educating the public about these risks, may still help raise awareness about crypto fraud. However, Fosh warned that simply issuing alerts without the backing of enforceable penalties may not be enough to tackle the problem effectively.

As online financial fraud and scams continue to proliferate, the FCA faces increasing pressure to demonstrate the impact of its regulatory powers and ensure that platforms take the necessary steps to prevent illegal crypto ads from reaching consumers. The financial sector, including regulators and law firms, continues to advocate for stronger measures to hold online platforms accountable for hosting these deceptive advertisements.