FCA identifies common issues with crypto financial promotions
Since 8 October, the UK Financial Conduct Authority (FCA) has been supervising firms against the new regime that is designed to give consumers the right information and risk warnings.
The regulator has identified three common issues with cryptoasset financial promotions. These include:
- promotions making claims about the ‘safety’, ‘security’ or ease of using cryptoasset services without highlighting the risk involved;
- risk warnings not being visible enough due to small fonts, hard-to-read colouring or non-prominent positioning;
- firms are failing to provide customers with adequate information on the risks associated to specific products being promoted.
The FCA expects authorised firms approving the financial promotions of cryptoasset firms to take their regulatory obligations seriously. Where this is not happening, the FCA will take action and has already placed restrictions on an authorised firm to restrict it from approving cryptoasset financial promotions.
The FCA is working with payments firms to limit UK consumer exposure to firms issuing illegal promotions. These businesses should consider the alerts the FCA has issued and play their part in protecting UK consumers.
The regulator is also continuing to identify and act against firms that are illegally promoting cryptoassets to UK consumers. Since the regime went live, the FCA has issued 221 alerts. Of these, 146 were issued in the first 24 hours of the new regime. This list will be continually updated as the FCA identifies firms which may be illegally communicating cryptoasset promotions and are failing to engage with it constructively.
Consumers should check the Warning List before making any investment in crypto. The list will help consumers understand where firms’ promotions may be breaking the law and to consider the promotion with the full information available.
Even with the new marketing rules, cryptoassets still remain high-risk and largely unregulated. If something goes wrong, it is unlikely people will have access to consumer protections, so should be prepared to lose all their money.
Since 8 October 2023, firms wishing to promote cryptoassets in the UK must, by law, be authorised or registered by the FCA, or have their marketing approved by an authorised firm. Under FCA rules, promotions must also be clear, fair and not misleading, labelled with prominent risk warnings and must not inappropriately incentivise people to invest. These changes bring cryptoassets in line with other high-risk investments.
The financial promotion regime applies to all firms marketing cryptoassets to UK consumers, regardless of whether the firm is based overseas or what technology is used to make the promotion. The FCA’s rules are designed to help people understand what they are purchasing, and the risks involved.
There are four routes crypto firms can take to lawfully communicate cryptoasset promotions:
- An authorised person communicates the promotion.
- An authorised person approves the promotion.
- A crypto firm registered under the Money Laundering Regulations (MLR) communicates the promotion.
- The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.