The Financial Conduct Authority (FCA) has issued a final warning to cryptoasset firms marketing to UK consumers, and those supporting them, to prepare for the new financial promotion regime.
The FCA’s letter, published on 21 September 2023, comes amid low engagement from within the industry, leading to concerns that many firms will not have updated their policies and practices by the time the new rules take hold.
The new regime, which is designed to make the marketing of cryptoasset products clearer and more accurate, came into force on 8 October 2023.
Under the new rules, cryptoasset firms’ marketing must be ‘clear, fair and not misleading’ and labelled with prominent risk warnings. Firms will no longer be allowed to “inappropriately incentivise people to invest” and incentives like ‘refer a friend’ bonuses are banned.
The rules will apply to all firms that market cryptoassets to UK consumers, regardless of whether the firm is based overseas or what technology is used for the promotion.
However, the FCA is concerned about the level of engagement ahead of the rule change, particularly from many unregistered, overseas cryptoasset firms with UK customers. Many of these firms have refused to engage with the regulator, and only 24 responded to a survey sent to over 150 firms.
“We are concerned by the failure of many overseas and unregulated crypto firms to engage with us on the new rules. Come 8 October, we will be taking action against firms illegally marketing to UK consumers,” said Lucy Castledine, Director of Consumer Investments at the FCA.
Anyone who continues promoting cryptoassets to UK customers past the October deadline, without complying with the rules, may be committing a criminal offence punishable by an unlimited fine and up to two years’ imprisonment.
The FCA has signalled that in response to industry readiness, it will consider giving cryptoasset firms more time to implement certain changes, for instance a 24-hour cooling-off period.
Firms could be given until 8 January 2024 to introduce features that require greater technical development, with the core rules still coming into effect from 8 October 2023. To secure an extension, firms must submit an application for flexibility, and they must be registered or authorised with the FCA.
“As a proportionate regulator, we’re giving firms that apply a little more time to get the other reforms requiring technology and business change right. We’ll maintain our close eye on firms during this extended implementation period,” said Castledine.
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