FCA urges UK crypto firms to get ready for financial promotions regime
The UK Financial Conduct Authority (FCA) has sent a letter to the management of cryptoasset firms.
The UK Government has now legislated to bring qualifying cryptoassets within scope of the financial promotion regime. From 8 October 2023 all firms marketing cryptoassets to UK consumers, including firms based overseas, must comply with the financial promotion regime.
The definition of a financial promotion is broad and applies in a technologically neutral way. A wide range of communications made by a firm are capable of being financial promotions including websites, mobile apps, social media posts and online advertising. Financial promotions communicated from outside the UK, but which are capable of having an effect in the UK, are within scope of the regime. This applies even if the promotion is not solely targeted at UK consumers.
The FCA expects that most, if not all, cryptoasset firms with UK retail customers will be within scope of the regime.
When the regime comes into force on 8 October 2023, there will be four routes to lawfully communicate cryptoasset promotions to UK consumers:
- The promotion is communicated by an authorised person.
- The promotion is made by an unauthorised person but approved by an authorised person.
- The promotion is communicated by a cryptoasset business registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
- The promotion otherwise complies with the conditions of an exemption in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“the Financial Promotion Order).
Promotions that are not made using one of these routes will be in breach of section 21 of the Financial Services and Markets Act 2000 (FSMA), which is a criminal offence punishable by up to 2 years imprisonment, an unlimited fine, or both.
The FCA warns that it will take robust action against persons illegally promoting to UK consumers. This may include, but it is not limited to, placing firms on its warning list, taking steps to remove or block any illegal financial promotions such as websites, social media accounts and apps, and enforcement action.