The Financial Conduct Authority (FCA) has issued a recent letter stating that cryptoasset firms marketing to UK consumers must prepare for the financial promotions regime by October 8, 2023. This legislation brings qualifying cryptoassets within the scope of the financial promotion regime, requiring all firms marketing cryptoassets to comply with its regulations. It is crucial for cryptoasset businesses to understand the main points outlined in this letter to ensure compliance and avoid penalties.
The financial promotion regime applies to a wide range of communications, including websites, mobile apps, social media posts, and online advertising. Even promotions made outside the UK but capable of affecting the UK market fall within the regime’s scope. Failure to comply with the regime may result in criminal charges, including imprisonment, fines, or both.
Routes for legally communicating financial promotions to UK consumers
To lawfully communicate cryptoasset promotions to UK consumers, there are four routes:
- Communication by an authorised person.
- Approval by an authorised person for promotions made by an unauthorised person.
- Communication by a cryptoasset business registered under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017.
- Compliance with exemption conditions in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
Preparing for the financial promotions regime
To prepare for the financial promotions regime, cryptoasset firms must:
- Determine which of the four legal routes they will use to make financial promotions and ensure compliance with the associated FCA rules.
- Consider the impact on UK customers if they are unable to communicate financial promotions and provide them with adequate notice of any changes to services. The FCA expects firms to clearly communicate any changes to services they will provide to UK consumers and give consumers adequate time to respond to any changes before they go into effect.
- Have orderly wind-down plans in place if they decide to cease providing services to UK consumers.
Registration under the MLRs
For cryptoasset businesses seeking to communicate financial promotions to UK consumers, the primary route will likely be registering with the FCA under the Money Laundering Regulations (MLRs). The FCA’s website provides information about the anti-money laundering and counter-terrorist financing (AML/CTF) regime, along with guidance for firms seeking registration under the MLRs. When applying for registration, firms must provide the specified information and pay a registration fee. The FCA has up to three months to assess the application and may request additional information if needed. It is important to submit complete and accurate documents, as poor quality or incomplete submissions will be rejected.
Next Steps
Cryptoasset firms must carefully consider the implications of the financial promotions regime and take necessary actions to ensure compliance by October 8, 2023. The FCA is committed to taking robust action against persons illegally promoting to UK consumers, including placing firms on warning lists, requesting takedowns of non-compliant promotions, and enforcing penalties.
To assess firms’ preparedness, the FCA requests a response to the survey provided in the letter. Additionally, roundtables will be organised in July to discuss the expectations for firms seeking registration under the MLRs. Firms interested in attending these roundtables can express their interest via email to pda@fca.org.uk
To read the full letter from the FCA, click here.
