A change in legislation has brought cryptoasset promotions under our remit. From 8 October, the Financial Conduct Authority (FCA) has been supervising firms against the new regime that is designed to give consumers the right information and risk warnings.
- 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 UK regulator expects authorised firms approving the financial promotions of cryptoasset firms to take their regulatory obligations seriously. Where this is not happening, they will take action and have already placed restrictions on an authorised firm to restrict it from approving cryptoasset financial promotions.
The FCA is working with businesses including social media platforms, app stores, search engines and domain name registrars to remove or block illegal promotions. They are also working with payments firms to limit UK consumer exposure to firms issuing illegal promotions. These businesses should consider the alerts issued and play their part in protecting UK consumers.
They are 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. This list will be continually updated as they identify firms which may be illegally communicating cryptoasset promotions and are failing to engage with them 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.
- The Government has legislated to bring promotions of certain cryptoassets within the financial promotions regime. Following this change, there are 4 routes cryptoasset firms can take to lawfully communicate 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.
- Where firms are engaging with the FCA in good faith with a view toward achieving compliance they are taking a proportionate approach to implementation.
- The FCA has been warning firms since February this year to get ready for these changes. Recently they also published a letter warning crypto firms of the impending deadline to comply and to urgently consider their position and communication with customers if they believe they will not be able to meet the October deadline.
- In addition to FCA extensive engagement with the industry throughout this year, they have also set out expectations for firms complying with the new rules.
- In the case of non-compliance, the FCA will take robust action to remove illegal content to protect consumers.
- The new financial promotion rules for cryptoasset promotions support the FCA’s 3 core commitments laid out in the 2023/24 Business Plan to reduce and prevent serious harm, set and test higher standards and promote competition and positive change.
Need some promotional advice? If you want to understand more about how to make sure your marketing materials meet FCA standards, please click here.
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