FCA writes to overseas firms about crypto promotions

The FCA has written to overseas firms, setting out its expectations on complying with the financial promotion regime for cryptoassets. Firms are reminded – again – to make sure they are ready to comply with the extended regime by 8 October 2023.

Options for crypto promoters

In its letter dated 4 July 2023, the FCA spells out the four legal routes for communicating cryptoasset promotions to UK consumers under the new regime:

1. The promotion is communicated by an authorised person.
2. The promotion is made by an unauthorised person but approved by an authorised person.
3. The promotion is communicated by a cryptoasset business registered with the FCA under the Money Laundering Regulations.
4. The promotion otherwise complies with the conditions of an exemption.

Potential penalties

The FCA emphasises that promotions that are not made using one of these routes will be in breach of the financial promotion restriction, which is a criminal offence. The FCA promises robust action against persons illegally promoting to UK consumers, for example by placing firms on the FCA’s warning list and taking steps to remove or block any illegal financial promotions such as websites, social media accounts and apps.

Registration option

Time is of the essence. Firms that plan to seek registration with the FCA in order to communicate crypto promotions now only have three months to become registered. The FCA has up to three months to assess registration applications, and the clock only starts once it has all the information it needs to make that assessment.

Overseas firms will also need to be mindful that the FCA has also said that it expects that firms will need to have a “bona fide UK presence” to obtain registration, seemingly imposing a de facto onshoring requirement for currently overseas firms looking to access the UK retail market via this route.

FCA survey

With only one application for registration received in the last month, the FCA is clearly wondering how firms plan to comply with the incoming regime. It is not a surprise then that the FCA requests firms to both acknowledge receipt of its letter and respond to a survey explaining what steps firms are taking to prepare for the regime. Responses to the survey are requested as soon as possible and no later than 4 August 2023.

FCA rules

Firms who can continue to communicate crypto promotions under the new regime also have work to do in the next few months. Promotions communicated through the first three routes listed above need to comply with FCA rules. These introduce risk warnings and a 24-hour cooling off period into customer journeys.

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