On 4 July 2023, the Financial Conduct Authority ("FCA") published a letter ("Letter") that it has sent to cryptoasset firms warning them that they must prepare for changes to the financial promotions regime that come into force on 8 October 2023. This follows the FCA's publication of its "near-final" rules on financial promotions for cryptoassets in June 2023. For more information on the "near-final" rules, please see our recent article (available here).
From 8 October 2023, all firms marketing cryptoassets to UK consumers, including firms based overseas, must comply with the financial promotion regime.
The Letter sets out the four routes to lawfully communicate cryptoasset promotions to UK consumers. Promotions that are not made in accordance with one of these routes will be in breach of section 21 of the Financial Services and Markets Act 2000, which is a criminal offence punishable by up to two years imprisonment, an unlimited fine, or both.
The FCA expects the main way cryptoasset firms will be able to communicate financial promotions to UK consumers is by registering with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended ("MLRs"). The Letter briefly explains such registration process and warns businesses to allow sufficient time for the FCA to assess applications. The FCA intends to hold roundtables in July that will set out its expectations for applicants seeking to register under the MLRs. It is also notable in this respect that the FCA recently updated its statistics on the number of successful cryptoasset firm registrations under the MLRs, with the vast majority being rejected, withdrawn or refused.
The FCA also reminded firms of its recent guidance consultation ("GC23/1"), which aims to provide additional clarity for firms on the standards that the FCA expects to ensure that firms' promotions are fair, clear and not misleading. Responses to GC23/1 are due by 10 August 2023.
Firms should carefully consider the content of the Letter and how the financial promotions regime will impact their business. The FCA emphasised that it will take robust action against persons illegally promoting to UK consumers including placing firms on its warning list, removing or blocking illegal financial promotions, and taking enforcement action.
The Letter and GC23/1 are available here and here respectively. The latest statistics on the number of successful registrations under the MLRs can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.