New rules designed to make the marketing of cryptoasset products clearer and more accurate, and that ban incentives like ‘refer a friend’ bonuses, will come into force on 8 October, 2023 in the UK.

The UK Financial Conduct Authority (FCA) has signalled that in response to industry readiness it will consider giving cryptoasset firms more time to implement certain changes, for instance a 24-hour cooling off period. Firms could be given until 8 January 2024 to introduce features that require greater technical development, with the core rules still coming into effect from 8 October 2023.

Firms must first apply for the flexibility which would then allow them time to make the required back-office changes successfully. The rules and the approach to implementation are aligned with the approach taken last year when the FCA introduced rules for marketing other high-risk investments.

From 8 October, UK consumers will have much greater protection as cryptoasset firms’ marketing must be ‘clear, fair and not misleading’, labelled with prominent risk warnings and must not inappropriately incentivise people to invest. These rules apply to firms wherever they are based globally and help strengthen how people are protected from the high risks associated with cryptoassets.

Anyone who continues promoting cryptoassets to UK customers past the October deadline without complying with the rules, may be committing a criminal offence punishable by an unlimited fine and/or up to 2 years imprisonment.

The FCA continues to remind people that purchasing cryptoassets remains high-risk and that they should be prepared to lose all their money.

Cryptoasset firms registered or authorised by the FCA can apply for flexibility under a modification by consent. If their application is successful, they will have until 8 January 2024 to implement the 24-hour cooling period, client appropriateness testing and client categorisation features. All other measures of the financial promotions regime will come into effect from 8 October 2023.

From 8 October 2023 the Government legislated that there will be four routes cryptoasset firms can take when lawfully communicating cryptoasset promotions:

1. An authorised person communicates the promotion.

2. An authorised person approves the promotion.

3. A crypto firm registered under the Money Laundering Regulations (MLR) communicates the promotion.

4. The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.

The deadline for the new financial promotions rules follows shortly after the deadline for UK cryptoasset firms to comply with the Travel Rule (1 September 2023).

The Travel Rule was introduced following Government legislation, with the UK being one of the first groups of countries to adopt the rule. The Travel Rule helps to bring greater transparency to cryptoasset transactions, improve sanctions screening and tackle the misuse of cryptoassets.