FCA Letter to Unregistered Cryptoasset Firms

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Categories Regulation, Taxation Posted on July 9, 2023July 10, 2023

Today the FCA have written to unregistered cryptoasset firms regarding the incoming financial promotions regime. All cryptoasset firms marketing to UK consumers must get ready for the financial promotions regime by 8 October 2023.

Background

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

The proposed legislative approach was updated in a policy statement published 1 February 2023. The financial promotions 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.

Under section 21 of the Financial Services and Markets Act 2000 (FSMA), a person is prohibited from issuing a financial promotion unless it is:

A. issued by a FSMA authorised firm;

B. approved by a FSMA authorised firm; or

C. falls within an exemption under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005

The UK Financial Promotion Restriction applies only to ‘controlled investments’ and to ‘controlled activities’. A list of each can be found in the FPO.

Financial promotions are broadly defined because it relates to any invitation or inducement to engage in investment activity and captures any communications which are capable of having an effect in the UK.

What is changing

FCA proposed to classify cryptoassets as ‘Restricted Mass Market Investments’.

This would allow cryptoassets to be mass marketed to UK consumers subject to certain restrictions, in addition to the overarching requirement that financial promotions must be fair, clear and not misleading.

The restrictions proposed included: clear risk warnings, banning incentives to invest, positive frictions, client categorisation requirements and appropriateness assessments.

Who this is for

This rules will be directly relevant to:

  • consumers investing, or who are considering investing, in cryptoassets
  • cryptoasset businesses registered with the FCA 
  • cryptoasset business considering, or in the process of, registering with the FCA 
  • overseas cryptoasset firms marketing, or considering marketing, to UK consumers 
  • authorised firms considering communicating or approving cryptoasset financial promotions 
  • trade bodies for the cryptoasset sector
  • other persons involved in communicating cryptoasset financial promotions to UK consumers

The letter is available to view on the FCA website here.

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