Blog

What is happening?

What are the key points?

In January 2022, the Government published a consultation response setting out its intention to legislate to bring the promotions of certain cryptoassets within the FCA’s remit. This regime will apply 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.

On 1 February 2023, the Government published a policy statement on its approach to cryptoasset financial promotions regulation. The policy statement sets out the Government’s intention to introduce a bespoke exemption in the Financial Promotion Order for cryptoasset businesses registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLRs’).

This exemption will enable cryptoasset businesses which are registered with the FCA under the MLRs, but who are not otherwise authorised persons, to communicate their own cryptoasset financial promotions to UK consumers. The policy statement also set out the Government’s intention to reduce the implementation period for the regime from six months to four months from the relevant legislation being made in Parliament.

Subject to Parliamentary approval, when the regime comes into force, there will be four routes to communicating cryptoasset promotions to UK consumers:

• The promotion is communicated by an FCA authorised person.
• The promotion is made by an unauthorised person but approved by an FCA authorised person. Legislation is currently making its way through Parliament which, if made, would introduce a regulatory gateway that authorised firms will need to pass through in order to approve financial promotions for unauthorised persons.
• The promotion is communicated by a cryptoasset business registered under the MLRs with the FCA.
• The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.

For these purposes, a firm authorised only under the Electronic Money Regulations or the Payment Services Regulations is not considered to be an authorised person and so cannot communicate or approve financial promotions.

Promotions that are not made using one of these routes will be in breach of section 21 of the Financial Services and Markets Act 2000, which is a criminal offence punishable by up to two years imprisonment.

The FCA expects to take a consistent approach to cryptoassets to that taken in its new rules, in place from 1 February 2023, for other high-risk investments. This will mean firms being 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 their promotions are clear, fair and not misleading.

Cryptoasset businesses marketing to UK consumers, including firms based overseas, must now prepare for this regime.

The Government intends to grant the FCA supervision and enforcement powers over MLR registered cryptoasset businesses relying on the new bespoke exemption. It has undertaken to take robust action where firms promote cryptoassets to UK consumers in breach of the requirements of the financial promotions regime. This may include, but it is not limited to, taking down websites that are in breach, issuing public warnings and enforcement action.

As set out in Regulations 8 and 9 of the MLRs, cryptoasset businesses must register with the FCA if they are carrying on certain cryptoasset activities. Cryptoasset businesses and any person who is an officer, manager and beneficial owner in the business, will be subject to the fit and proper requirements under Regulation 58A of the MLRs.

Cryptoasset businesses that are already registered under the MLRs will be able to communicate their own financial promotions for cryptoassets, subject to complying with the conditions of the exemption and the relevant FCA rules. They will not have to apply for any further permissions to communicate their own promotions.

The FCA has recently sent a letter to a number of overseas cryptoasset businesses that might be impacted by the new UK financial promotions regime. The letter sets out the background to the changes and the four routes available to communicate cryptoasset promotions to UK consumers once the new regime comes into force. The FCA also intends to send, to those firms willing to respond, a short on-line survey with some questions about their UK business (if any) and their plans in response to the UK’s new financial promotions regime. 

How can we help you?

Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, our team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your cryptoasset financial promotions arrangements, or more general regulatory questions?  Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.