On 27 March 2023, HM Treasury published a draft of The Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023, along with a draft explanatory memorandum. The draft statutory instrument (SI) proposes to expand the scope of the financial promotion restriction in section 21 of the Financial Services and Markets Act 2000 (FSMA), by amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (2005/1529) (the FPO), to include financial promotions in respect of certain cryptoassets.
The SI and relevant FCA rules will provide for the regulation of in-scope cryptoasset financial promotions. This is aimed at improving consumers’ understanding of the risks associated with cryptoasset investments and ensuring that cryptoasset promotions are held to the same standards as for broader financial services.
The draft SI:
- Creates a new controlled investment (defined as a “qualifying cryptoasset”) and amends relevant controlled activities to incorporate reference to qualifying cryptoassets, through changes to the FPO.
- Applies and modifies certain existing exemptions in the FPO to qualifying cryptoassets and creates a temporary, limited exemption to the financial promotion restriction (imposed by section 21(1) of FSMA, for cryptoasset businesses that are not authorised persons but are registered with the FCA under the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692)).
- Allows for an implementation period of four months from the day after the SI is made before it comes into force. This period is intended to allow industry time to understand how the regime will be practically implemented, with the aim of ensuring compliance across the industry. The government had originally planned to provide for a six-month implementation period, but this was reduced to four in light of recent market turmoil and growing consumer risks and harms relating to cryptoassets.
HM Treasury notes in the explanatory memorandum that it will not be issuing further guidance relating to the SI. The FCA intends to amend its perimeter guidance for authorised and registered firms.
A Keeling schedule has also been published to assist with the interpretation of the SI.