The UK’s Financial Conduct Authority (FCA) has issued a letter to cryptoasset firms outlining a new financial promotions regime. This legislation, set to be enforced from 8 October 2023, requires all entities marketing cryptoassets to UK consumers, including those based abroad, to adhere to the new regime. The scope of this regulation extends to various forms of communication such as websites, mobile apps, social media posts, and online advertisements.
The FCA has defined four legal pathways for cryptoasset promotions to UK consumers to be lawfully communicated. These include promotions conveyed by an authorised person, those made by an unauthorised person but approved by an authorised person, promotions 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), and promotions that meet the conditions of an exemption in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
The FCA has cautioned that promotions not following these pathways will violate section 21 of the Financial Services and Markets Act 2000 (FSMA). Such violations are considered criminal offences, attracting penalties of up to 2 years imprisonment, an unlimited fine, or both. The FCA has committed to taking strong action against those promoting to UK consumers illegally.
To assist firms in understanding these new regulations, the FCA has released a Policy Statement (PS23/6) and a Guidance Consultation (GC23/1). These documents aim to clarify the standards required for financial promotions to be fair, clear, and not misleading.
The FCA has encouraged all cryptoasset firms marketing to UK consumers to be ready for the new financial promotions regime by 8 October 2023. Unregistered or unauthorised cryptoasset businesses are advised to consider which of the four legal pathways they will use for their financial promotions and how they will fulfil the requirements of that pathway and the associated FCA rules.
The FCA anticipates that the main method for cryptoasset businesses to communicate financial promotions to UK consumers will be through registration with the FCA under the MLRs. The FCA has provided information about the anti-money laundering and counter-terrorist financing (AML/CTF) regime and information for firms seeking registration under the MLRs on their website.
The FCA has also clarified that it will not review or comment on draft documents as part of their assessment of an application and that submissions of poor quality or incomplete will be rejected. The FCA has emphasised the importance of full disclosure of all relevant information and has warned that it takes any non-disclosure of information that could impact their assessment very seriously.