On 4 July 2023, the FCA published a letter addressed to cryptoasset firms, warning them that they must get ready for the financial promotions regime by 8 October 2023.
The letter explains that the UK Government has now legislated to bring qualifying cryptoassets within scope of the financial promotions regime and reminds firms that once the regime comes into force, all firms marketing cryptoassets to UK consumers, including firms based overseas, must comply with the financial promotions regime.
The FCA’s near-final rules on cryptoasset promotions are set out in Policy Statement 23/6: Financial promotion rules for cryptoassets (PS23/6), published in June.
In the letter, the FCA outlines the four routes that will be available for firms to lawfully communicate cryptoasset promotions to UK consumers, and flags that promotions that are not made using 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 2 years imprisonment, an unlimited fine, or both.
In order to prepare for the financial promotions regime, the letter states that unregistered or unauthorised cryptoasset businesses marketing to UK consumers should:
- Consider which of the four 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.
- 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.
The FCA expects that the main way cryptoasset businesses will be able to communicate financial promotions to UK consumers is by being registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). The letter briefly outlines the registration process, including the timeframes involved and the need to fully disclose all relevant information within the application. The FCA is planning to arrange roundtables during July to explain its expectations of applicants seeking to register under the MLRs.
The letter advises firms to carefully consider the letter and how the financial promotions regime will impact their business, and to ensure they are ready to comply by 8 October 2023. The FCA intends to take robust action against persons illegally promoting to UK consumers, which may include placing firms on its warning list; requesting take-downs of websites, social media accounts, apps and all other promotions that are in breach; and enforcement action.
Firms are asked to confirm receipt of the letter. In addition, to understand what steps firms are taking to prepare for the regime, they are asked to respond to the questions set out in a survey by 4 August 2023 at the latest.