Firms must start preparing now for this regime as robust action will be taken against firms breaching these requirements.
The Government published a policy statement on February 1st, 2023 regarding its approach to cryptoasset financial promotions regulation. The statement sets out the Government’s intention to introduce a bespoke exemption in the Financial Promotion Order for cryptoasset business registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (“MLR’s”).
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 statement also sets out the Government’s intention to reduce the implementation period for the regime from 6 months to 4 months from the relevant legislation being made in Parliament.
After Parliamentary approval, once the regime comes into force there will be 4 routes to communicating cryptoasset promotions to UK consumers.
1. The promotion is communicated by an FCA authorised person.
2. The promotion is made by an unauthorised person but approved by an FCA authorised person.
3. The promotion is communicated by a cryptoasset business registered under the MLRs with the FCA.
4. The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.
A firm only authorised under the Electronic Money Regulations or the Payment Services Regulations is not considered an “authorised person” and cannot communicate or approve financial promotions. This is set in legislation and cannot be modified by FCA rules.
Promotions will be in breach of section 21 of the Financial Services and Markets Act 2000 if they are not made using one of the above mentioned routes, which is a criminal offence punishable by up to 2 years imprisonment.
Cryptoassets remain high risk. Consumers have repeatedly been warned that they should be prepared to lose all of their money if they buy cryptoassets. Recent events such as the high-profile failure of several cryptoasset firms further highlights the riskiness of these products. It is unlikely that any compensation will be offered to consumers who lose money under the Financial Services Compensation Scheme.
Cryptoasset businesses marketing to UK consumers, including firms based overseas, must get ready for this regime.
If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact email@example.com or your usual A.C.T. contact.