Timetable set for strict crypto promotion rules

It has been three years since HM Treasury suggested bringing cryptoassets within the scope of its financial promotion regime. Now the legislation has been made and the FCA has finalised the “tough new rules” which it will apply to cryptoasset marketing. The rules will apply from 8 October 2023.

Cryptoasset firms which market to UK consumers now have to consider whether they can advertise their cryptoasset business and, if so, how to comply with the new rules.

Can you make a cryptoasset promotion?

From 8 October 2023, cryptoasset ads will be treated like other financial promotions in UK law. Unless an exemption is available, only businesses which are licensed with the Financial Conduct Authority will be allowed to make cryptoasset promotions.

Importantly, an exemption is available for UK cryptoasset businesses which have registered with the FCA for the purposes of money laundering supervision. This will allow these UK-based firms to continue making their own cryptoasset promotions. See our blogpost: UK Crypto Proposals: registered firms win breathing space over financial promotions

Overseas firms which are not registered with the FCA are left with very limited options for marketing cryptoassets to UK consumers. For example, overseas firms could try to find a fully licensed firm which can approve cryptoasset promotions of unauthorised firms. In practice, few firms are likely to be able to do this.

How can you make a compliant cryptoasset promotion?

In a policy statement (PS23/6) the FCA has confirmed the financial promotion rules it will apply to cryptoassets. These rules will have a significant impact on the UK’s retail cryptoasset market as they are intended to add more friction into the process for buying cryptoassets. In the next four months, firms targeting UK consumers will need to find a way to make the necessary changes to their customer journey so that they meet the new standards.

These rules include:

• ensuring that promotions are fair, clear and not misleading
• allowing a 24-hour cooling-off period for first-time investors
• providing personalised risk warnings for first-time investors
• categorising clients and making appropriateness assessments for certain types of promotion
• keeping additional records of cryptoasset promotions

What happens next?

The rules apply from 8 October 2023 following a four-month transition period. In the meantime, the FCA is consulting on additional guidance on cryptoasset financial promotions. The deadline for feedback on the draft guidance is 10 August 2023. The FCA intends to finalise this guidance in autumn 2023.

Read our FintechLinks blogpost.

Listen to our payments podcast episode on crypto marketing.