The Financial Conduct Authority (FCA) of the United Kingdom has announced that a new financial promotions regime will be implemented for crypto assets starting October 8. In a letter dated July 4, the FCA outlined the various legal pathways that firms can use to promote crypto assets to consumers in the UK. These pathways include communication by an authorized person, communication by an unauthorized person with approval from an authorized person, or communication by a firm registered under the FCA Money Laundering Regulations. Firms that do not utilize any of these means must adhere to the exemption provision under the Financial Services and Markets Act 2000 Financial Promotion Order 2005.
Strict Enforcement and Consequences for Violations
Under the new regime, crypto firms are required to include specific risk warnings and positive frictions in their advertisements. Additionally, they must ensure that their promotions are fair, clear, and not misleading. The FCA has stated that it will strictly enforce this regulation and any violations will be considered a criminal offense. Offenders could face up to two years of imprisonment, an unlimited fine, or both. The FCA also has the authority to place defaulters on a warning list and remove and block any illegal financial promotions. Legal action may also be pursued against those who violate the regulations.
Applicability to Non-UK Firms
Firms that are not registered in the UK are still subject to the financial promotion regime if they market to UK residents. The FCA clarifies that financial promotions that originate from outside the UK but have an impact within the UK fall within the scope of the regime. This applies even if the promotion is not solely targeted at UK consumers.
Previous Actions Taken by UK Regulators
This is not the first instance of UK regulators taking action against misleading crypto advertisements. The Advertising Standards Authority has previously ordered the removal of several crypto adverts due to their deceptive nature.
Overall, the new financial promotions regime for crypto assets in the UK aims to ensure that advertisements are transparent, accurate, and do not mislead consumers. The FCA’s strict enforcement and potential consequences for violations serve as a deterrent for firms that may engage in deceptive practices. The regulations also apply to non-UK firms marketing to UK residents, emphasizing the FCA’s commitment to protecting consumers regardless of the origin of the promotion.