On 21 September 2023, the FCA published a letter setting out a final warning for cryptoasset firms marketing to UK consumers and those supporting them to get ready for the financial promotion regime.
In the letter, the FCA highlights the following:
- It is concerned by the poor engagement from many unregistered, overseas cryptoasset firms who have UK customers, with many firms refusing to engage with the FCA in relation to the regime despite its best efforts. The letter flags that many customers depend on communications from firms to access and deal with their cryptoassets and so it is important that all firms are ready to comply with the new regime when it comes into force.
- Consumers are encouraged to check the Warning List, which will be continually updated once the regime takes effect, before engaging with a firm.
- The FCA will take action against firms illegally promoting to UK consumers including, but not limited to, placing firms on the Warning List and taking steps to remove or block any illegal financial promotions such as websites, social media accounts and apps. In certain cases, it will consider enforcement action, which may include applying to a Court for injunctions, seeking payment of compensation or, in the most serious cases, criminal prosecution.
- All businesses supporting unregistered cryptoasset firms are reminded that they should carefully consider their obligations under the Proceeds of Crime Act 2002 (POCA), the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and, once in force, the Online Safety Bill.
- The FCA is concerned that benefits obtained by unregistered cryptoasset businesses from illegal financial promotions could be criminal property, and that intermediaries are at risk of receiving and dealing with this criminal property through, for example: the fees generated by app stores, social media platforms, search engines and domain name registrars from hosting illegal financial promotions; investments made due to illegal financial promotions; and fees charged by payments firms or other intermediaries for services to unregistered crypto asset businesses that generate income through illegal financial promotions.
- There are also concerns that businesses supporting unregistered cryptoasset firms may be at risk of committing money laundering offences under POCA. Firms must carefully consider their arrangements with unregistered cryptoasset firms and ensure that they are not engaged in, supporting, or facilitating money laundering.
- Once the regime enters into force, unregistered cryptoasset firms must cease making illegal financial promotions to UK consumers. Unregistered cryptoasset firms can legally communicate financial promotions to UK consumers if those promotions are approved by an authorised firm.
- The FCA expects cryptoasset firms which cannot legally communicate financial promotions to UK consumers to have robust systems and procedures to prevent UK consumers accessing and responding to promotions they provide.
Going forward, the letter sets forth that, if firms believe they are going to be in breach after the regime comes into force, they need to urgently consider their position and must stop or block illegal promotions. If firms fail to comply with the requirements of the regime, it is likely that the FCA will issue an alert against them on its website and seek to block or remove those financial promotions.