On 6 June 2023, the FCA published Policy Statement 23/6: Financial promotion rules for cryptoassets (PS23/6).

Earlier consultations

In January 2022, HM Treasury published a consultation response regarding its intention to legislate to bring certain promotions of qualifying cryptoassets within the FCA’s remit. On 1 February 2023, HM Treasury issued a policy statement confirming that it had received broad support for its proposals and that it would act to ensure the appropriate regulation of cryptoasset promotions through secondary legislation, broadly in line with its consultation.

In January 2022 the FCA issued a consultation on financial promotion rules for high-risk investments including cryptoassets. In August 2022, the regulator published a Policy Statement (PS22/10) containing final rules for other high-risk investments excluding cryptoassets. In February 2023 the FCA issued a statement calling on cryptoasset firms marketing to UK consumers to get ready for a new financial promotions regime. In PS23/6 the FCA summarises the feedback it received on its earlier consultation on cryptoassets and sets out its final policy position and near final Handbook rules.

Key points

In PS23/6 the FCA reports that:

  • Having considered the feedback to its consultation it intends to proceed with categorising cryptoassets as ‘Restricted Mass Market Investments’ and applying the associated restrictions on how they can be marketed to UK consumers.
  • It is making targeted changes to its consultation proposals to align with the rules set out in PS22/10 for other high-risk investments. It believes these changes are also appropriate for cryptoasset financial promotions. In PS23/6 Table 1 (pages 9 and 10) summarises the changes and includes changes made as part of PS22/10. Changes highlighted in bold on the table are unique to PS23/6 and were not previously covered in PS22/10.
  • It has published near final rules that can be found in Appendix 1 of PS23/6. Subject to exceptional circumstances, the FCA expects that no further changes will be made to them and that they will have effect from 8 October 2023.
  • It will take robust action against firms for breaching the rules once they are in effect. This may include, but is not limited to, requesting take downs of websites that are in breach, placing firms on its warning list, placing restrictions on firms to prevent harmful promotions and enforcement action.
  • It is also publishing a Guidance Consultation on non-Handbook guidance, so firms clearly understand its expectations around the requirement that financial promotions are fair, clear and not misleading. The deadline for commenting on the Guidance Consultation is 10 August 2023.

Communication routes

When the FCA’s near final rules come into force on 8 October 2023 there will be 4 routes to lawfully communicate cryptoasset promotions to UK consumers:

  1. The promotion is communicated by an FCA authorised person.
  2. The promotion is made by an unauthorised person but approved by an FCA authorised person. Legislation is currently making its way through Parliament which, if made, would introduce a regulatory gateway that authorised firms will need to pass through to approve financial promotions for unauthorised persons.
  3. The promotion is communicated by a cryptoasset business registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
  4. The promotion otherwise complies with the conditions of an exemption in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

Promotions communicated through routes 1, 2 or 3 need to comply with the new FCA rules when they come into force.

Next steps

The FCA warns that cryptoasset businesses marketing to UK consumers, including firms based overseas, must get ready by 8 October 2023 for the new regime.

Cryptoasset businesses that are already registered under the MLRs will be able to communicate their own cryptoasset financial promotions, subject to complying with the conditions of the exemption and relevant FCA rules. They will not have to apply for any further permissions to communicate their own promotions. 

Registered cryptoasset businesses should:

  • Review the statutory instrument giving effect to the new regime, particularly the conditions of the Article 73ZA exemption.
  • Have in place robust implementation plans for complying with the rules set out in PS23/6 by 8 October 2023. In particular, firms should review their consumer journeys to ensure they meet the requirements.
  • Review their systems, controls and governance arrangements to ensure they have robust oversight of financial promotions and can meet the regime’s requirements.
  • Consider the Guidance Consultation.

The FCA reminds unregistered cryptoasset firms marketing to UK consumers that financial promotions communicated from outside the UK, but which are capable of having an effect in the UK, are within scope of the financial promotions regime. This applies even if the promotion is not solely targeted at UK consumers. If the financial promotion is not made using one of the four routes set out above, firms will be committing a criminal offence and be liable for up to 2 years’ imprisonment, the imposition of an unlimited fine, or both.

Unregistered cryptoasset firms marketing to UK consumers should therefore:

  • Consider which of the 4 legal routes they will use to make their financial promotions, how they will meet the requirements of that route and the associated FCA rules that apply to cryptoasset promotions set out in PS23/6.
  • If firms intend to apply for registration with the FCA under the MLRs, firms should carefully review the FCA’s expectations of applications set out in PS23/6 and in its February 2023 statement. The FCA wants to register cryptoasset businesses who can meet the standards required and are resourced to do so.
  • Carefully consider how they will deal with UK customers if they are unable to communicate financial promotions to them. The FCA expects firms to clearly communicate any changes to services they will provide to UK consumers and give consumers adequate time to respond to any changes before they go into effect. 
  • If firms decide to no longer provide services to UK consumers the FCA expects them to have in place orderly wind-down plans to minimise any impact on UK consumers. Firms may find the FCA’s Wind-down Planning Guide useful in considering their plans.
  • Consider the Guidance Consultation.

Social media

The FCA reminds anyone promoting on social media that the financial promotion regime is technology neutral and applies to financial promotions made on social media platforms.