Further to the ASA’s clamps down on crypto-asset advertising and as discussed in one of our previous blog posts, HM Treasury has now issued its response to its July 2020 consultation relating to expanding the financial promotions regime to capture ‘unregulated’ crypto-assets.

Respondents to the consultation agreed that misleading advertising and a lack of suitable information means that there are consumer risks when it comes to the cryptoasset market, justifying intervention. Such intervention will take the form of the proposed rules as broadly outlined in HM Treasury’s initial consultation paper.

This will result in ‘qualifying cryptoassets’ being added to the list of controlled investments in the Financial Promotion Order (“FPO”), which aims to capture remaining cryptoassets that are not currently caught under the promotion rules (such as utility tokens and exchange tokens).

Qualifying cryptoassets

Despite some responses, HM Treasury considered the terms around fungibility and transferability in its proposed definition of ‘qualifying cryptoassets’ to be sufficiently clear, however a final definition is still under development. A transferability exclusion is also intended to be added which would take out of scope tokens such as travel passes, lunch passes and supermarket loyalty schemes which may be inadvertently caught under the new rules. HM Treasury further confirmed that non-fungible tokens, which often take the form of digital collector items, will also fall out of scope of the new rules.

Whilst the initial definition included specific reference to distributed ledger technology (“DLT”), this will now be removed. A new technology agnostic definition is aimed at future-proofing for innovations in the underlying technology that cryptoassets utilise.

Also excluded from the definition will be other controlled investments in the FPO, e-money, central bank money, and cryptoassets that are only transferable to vendors in payment for goods or services.

Controlled activities

The initial consultation proposed to amend a number of the controlled activities in the FPO (relating to dealing, arranging, managing, advising and agreeing) to apply to qualifying cryptoassets. In its response, HM Treasury highlight that certain crypto-specific activities such as operating cryptoasset exchanges, cryptoasset ATMs and airdrops could fall within the amended controlled activities, depending on the particular circumstances. Therefore, no new controlled activities are intended to be added.

Regarding activities relating to wallets, the response outlined that the central activities causing consumer harm, where misleading advertising is more commonly found, relate to buying and selling cryptoassets, and not the provision of custody services, which lack the same risk profile.


In terms of rule exemptions, HM Treasury concluded that the approach should be consistent with the broader application of exemptions in the FPO generally, with there being no reason to take a different approach specifically for cryptoassets. This will therefore require an assessment on a case-by-case basis to determine whether any, and if so which, exemptions apply. In this vein, the exemptions relating to certified high net worth individuals and self-certified sophisticated investors will not apply to qualifying cryptoassets.

Next steps

After taking into account industry feedback, a six-month transition period will be introduced to enable crypto-asset businesses to comply with the new rules, which will be introduced by way of secondary legislation. The FCA are also expected to consult on rules for cryptoasset promotions shortly. 

For now, impacted businesses should continue to monitor the progress of the new rules’ implementation and ensure that they are ready to comply once in force.

Written by Brandon Wong