FCA Initiates Legal Action Against HTX
The UK’s Financial Conduct Authority (FCA) has commenced legal proceedings against the global cryptocurrency exchange HTX, which formerly operated under the name Huobi. The FCA alleges that HTX has been unlawfully promoting cryptoasset services to consumers in the United Kingdom, in direct violation of the country’s strict financial promotion regulations.
Strengthening Consumer Protections with New Regulations
Since October 2023, any firm—regardless of whether it is based in the UK or overseas—wishing to market cryptoasset products or services to UK consumers must comply with the FCA’s financial promotions regime. The rules are designed to protect consumers from misleading, unfair, or otherwise harmful advertising related to cryptoassets. Engaging in unauthorised promotions, whether through social media, dedicated websites, or other digital channels, is considered a criminal offence under the regime.
Widespread Compliance, but HTX Holds Out
Following the implementation of these regulations, the FCA has reported extensive engagement with cryptoasset firms, most of whom have responded positively and taken steps to ensure compliance. However, HTX has remained an exception. Despite receiving direct warnings from the FCA about its activities, HTX has continued to advertise cryptoasset services to UK consumers in apparent disregard for the new legal requirements.
The FCA’s concerns are exacerbated by HTX’s opaque organisational structure, which deliberately obscures the identities of its owners and the individuals responsible for operating its website. Numerous attempts by the FCA to establish communication with HTX have reportedly been ignored, further elevating regulatory concerns.
Enforcement Measures Escalate
In response to HTX’s continued non-compliance, the FCA has escalated its efforts by taking formal legal action. The regulator has formally requested that social media companies restrict HTX’s accounts from being accessible to UK-based users. Additionally, the FCA has asked Google and Apple to remove HTX’s applications from their respective UK app stores.
Since the FCA commenced these proceedings, HTX has reportedly taken steps to prevent new UK customers from registering on its platform. However, existing UK-based users are still able to access the platform and view potentially unlawful financial promotions. HTX has not offered any guarantees that these changes are permanent, leaving the FCA concerned about the possibility of continued breaches of the law.
FCA’s Commitment to Consumer Safety
The FCA has reiterated its commitment to protecting UK consumers from the risks posed by unregulated and illegal crypto marketing. In 2023, the regulator proactively contacted firms operating in the crypto sector to advise them of the impending regulatory changes and to warn of robust enforcement action for non-compliance. The FCA stated that its measures could include placing non-compliant firms on official warning lists, requesting the removal of offending websites and social media accounts, and pursuing enforcement through the courts where necessary.
This case marks the first instance of the FCA taking enforcement action against a crypto firm for illegal financial promotions aimed at UK consumers. The regulator has made it clear that it will continue to pursue firms that fail to comply with the financial promotions regime, prioritising consumer safety and market integrity.
Implications for the Crypto Industry
The FCA’s decisive action against HTX sends a strong signal to both domestic and international crypto firms about the importance of regulatory compliance when marketing to UK consumers. By holding firms accountable for their promotional activities, the FCA aims to foster a safer investment environment and to curb the proliferation of misleading or harmful cryptoasset advertising.
As the regulatory landscape for cryptoassets continues to evolve, firms operating in this sector are urged to remain vigilant and proactive in understanding and adhering to their legal obligations. Failure to do so may result in significant enforcement action and reputational harm.
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