Treasury pushes ahead with expansion of financial promotions regime to capture cryptoassets

HM Treasury has published draft legislation in the latest stage of its plans to bring cryptoassets within the financial promotions regime. 

The draft statutory instrument (SI) expands the scope of the financial promotion restriction - in section 21 of the Financial Services and Markets Act 2000 - by amending its offspring Financial Promotion Order to capture promotions for certain cryptoassets. In doing so, the draft SI creates a new controlled investment, a "qualifying cryptoasset". In short, this is any cryptoasset which is fungible and transferable, subject to several exemptions from electronic money and fiat currency (digital or otherwise) to limited-use cryptoassets and cryptoassets that cannot be transferred or sold in exchange for money or other cryptoassets (other than via redemption). 

At the same time, the Treasury will establish a temporary, narrow exemption to the financial promotion restriction for non-authorised cryptoasset businesses on the FCA’s AML register. An update from the Treasury issued in parallel with the draft SI notes the government's further plans to bring stablecoins "with propensity to be used for payment" into the scope of UK regulation, and refers to its consultation on its approach to unbacked cryptoassets. 

The ultimate aim of these changes is to improve customer understanding of the inherent risks related to cryptoasset investing and to harmonise the standards for cryptoasset promotions with financial services more broadly. On the heels of recent market volatility for cryptoassets, the Treasury has confirmed that the implementation period will be cut from six to four months from the day after the SI is made. 

Further rules and guidance from the FCA is expected to follow, setting out how the regulator will oversee and enforce the changes.