The financial watchdog of the United Kingdom, the Financial Conduct Authority (FCA), has sent a letter to cryptocurrency-related companies operating in the country or targeting UK-based customers to remind them of the upcoming financial promotion regime.
In the letter dated July 4, UK’s FCA warned that all crypto firms targeting UK customers must make themselves compliant with the newly legislated financial promotion regime by October 8. The letter reads:
“We write to inform you that the UK Government has now legislated to bring qualifying cryptoassets within the scope of the financial promotion regime. From 8 of October 2023, all firms marketing cryptoassets to UK consumers, including firms based overseas, must comply with the financial promotion regime.”
Failure to Comply With the Financial Promotion Regime, Will be a Criminal Offence
According to the letter, after the financial promotion regime comes into effect on October 8, “there will be four routes to lawfully communicate cryptoasset promotions to UK consumers.”
This includes promotions communicated by an authorized person, promotions made by an unauthorized person but approved by an authorized person, promotions communicated by a crypto firm registered with the FCA, and finally, a promotion that qualifies as exempt under the UK’s Financial Services and Markets Act.
Per the text of the letter, a wide range of communications, including websites, mobile apps, social media posts, online advertising, and promotions made outside the UK but are capable of having an effect in the UK, and even the promotion not solely targeted at UK consumers fall under the financial promotion regime. “We expect that most, if not all, cryptoasset firms with UK retail customers will be within the scope of the regime,” said UK’s FCA.
Promotions made through the first three routes should comply with the FCA rules outlined in the June 8 deadline. Failing to comply with the promotion regime will be a criminal offense “punishable by up to 2 years imprisonment, an unlimited fine, or both.” FCA wrote:
“We will take robust action against persons illegally promoting to UK consumers. This may include, but it is not limited to, placing firms on our warning list, taking steps to remove or block any illegal financial promotions such as websites, social media accounts and apps, and enforcement action.”
UK’s FCA first announced the financial promotion rules for crypto assets on June 8, 2023, to make sure crypto promotions are fair, clear, and not misleading. The rules also require firms to use specific risk warnings and positive frictions, such as a 24-hour cooling-off period for first-time investors to consider the risks of investing in digital assets.
The financial watchdog also published a Guidance Consultation on June 8 and is seeking responses to the consultation by August 10, 2023. The July 4 letter asks crypto firms to ensure their ´´business is ready to comply with the financial promotions regime by 8 October 2023.´´