The UK Government previously set out its intention to bring the promotion of certain cryptoassets within the FCA’s remit, applying to all firms marketing cryptoassets to UK consumers regardless of whether the firm is based overseas or the technology used to make the promotion.
The practical effect of this, said critics, would be to significantly restrict, or effectively ban, cryptoasset financial promotions, because there are unlikely to be authorised persons willing to approve the promotions of unauthorised cryptoasset firms.
The Government has published a policy statement on its approach to cryptoasset financial promotions regulation. Within it, the Government states its intention to introduce a bespoke exemption in the Financial Promotion Order (“FPO”) for FCA-registered cryptoasset businesses (registered by virtue of the UK’s money laundering regulations), permitting them to communicate their own cryptoasset financial promotions to UK consumers. In addition, the implementation period for the regime will be reduced from 6 months to 4 months following the passing of the relevant legislation.
As it stands, the exemption will only be temporary, with plans to bring certain stablecoins within the regulatory perimeter and consult on the future regulatory approach to unbacked cryptoassets. The Government will review its approach to the exemption alongside the future regulatory approach to cryptoassets.
The FCA has now outlined the four routes to communicating cryptoasset promotions to UK consumers (assuming Parliamentary approval of the Government’s proposals), namely where the promotions:
- are communicated by an FCA-authorised person;
- are made by an unauthorised person but approved by an FCA-authorised person (subject to the planned regulatory gateway for approvals);
- are communicated by a cryptoasset business registered with the FCA for anti-money laundering purposes; or
- otherwise comply with the conditions of an exemption in the FPO.
The FCA reminds firms that promotions made not using one of these routes will amount to a criminal offence punishable by up to two years imprisonment. It intends to publish its final rules for cryptoasset promotions once the relevant legislation is made.
Firms would be required to use specific risk warnings and positive frictions (such as a 24-hour cooling off period) in their consumer journeys, in addition to the overarching requirement that promotions are clear, fair and not misleading. Further details are set out in the FCA’s Policy Statement for high-risk investments.
The FCA notes that it will take action where firms promote cryptoassets to UK consumers in breach of the requirements, including taking down websites, issuing public warnings and enforcement action.
... the government expects that this exemption will significantly widen the pool of cryptoasset businesses that can communicate their own promotions, incentivise cryptoasset businesses to be based in the UK and be AML regime compliant, and, crucially, fulfil the objective of the planned regulatory regime to promote innovation, enhance consumer protection and ensure that cryptoasset promotions can be held to equivalent standards as promotions of financial services products with similar risk profiles.