Last month (July 2023), the UK Financial Conduct Authority (“FCA”) published its Guidance Consultation relating to Financial promotions on social media (“GC23/2”), which includes requirements that apply to all individuals and entities who promote financial products using “communications capable of having an effect in the UK.” In particular, GC23/2 addresses cryptocurrency-related social media posts, so now seemed like a good time to update my previous post on rules that apply to crypto influencers (especially since I never got around to publishing Part IV like I promised):
Please note that this post is not meant to be considered legal advice, the list below is not meant to be exhaustive, and it only deals with promotions by – or which may be seen by or have an influence on – people who are citizens or residents of the US or UK.
FCA Guidance (UK):
According to GC23/2, If you are going to promote a cryptocurrency project on social media and that promotion is “capable of having an effect in the UK,” i.e., will be seen by people who reside in or are citizens of the UK, your communication should include all of the following statements:
- cryptocurrency is unregulated;
- any profits from cryptocurrency trading may be subject to tax; and
- the value of any investment in cryptocurrency could fall.
FTC Guidance (US):
The US Federal Trade Commission (“FTC”) has provided the following guidance for all social media influencers (not just cryptocurrency), so if you are being compensated (or compensating someone else) to promote a cryptocurrency project and the promotion is viewable by anyone who is a citizen or resident of the US, the promotion and/or social media post should:
- clearly and conspicuously disclose any “material connection” with the company, including the fact that the influencer is being paid or otherwise given some sort of consideration for the promotion;
- ensure that any required disclosures are clearly visible and made near any statements that the influencer makes about the company or the company’s products or services, regardless of any space limitations of the medium (e.g., Twitter) where the disclosure can be made via hashtags (e.g., #sponsored, #ad, etc.); and
- only provide honest and truthful opinions and actual experiences with the company’s products or services and only make factual statements about the company or the company’s products or services which the influencer knows for certain are true and can be verified.
SEC Guidance (US):
Section 17(b) of the Securities Act makes it unlawful for any person to:
[P]ublish, give publicity to, or circulate any … communication which … describes [a] security for a consideration received or to be received … without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.
15 U.S. Code § 77q
One could of course try to argue that a particular cryptocurrency is not a “security,” and therefore these rules don’t apply, but (1) that is beyond the scope of this post; and (2) it’s better to be safe than sorry, so, again, if you are being compensated (or compensating someone else) to promote a cryptocurrency project and the promotion is viewable by anyone who is a citizen or resident of the US, the promotion and/or social media post should include all of the following information:
- the nature of the compensation (i.e., the form of compensation);
- the scope of the compensation (i.e., the exact services being paid for); and
- the amount of the compensation.
Pro tip: I recommend that all of my clients (which includes both influencers and the people who hire them) have some sort of written agreement in place that lays out all of the requirements above.
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