FCA Provides 4 'Legal Routes' for Compliance with Upcoming Crypto Promotion Rules

The UK financial watchdog has said crypto firms in the country will have four “legal routes” through which they can comply with its rules for digital assets promotion coming into force on October 8, 2023. The Financial Conduct Authority (FCA) stated this today (Tuesday) in a letter sent out to crypto firms and jointly signed by Victoria McLoughlin, Head of Digital Assets Supervision, Policy and Competition in the Department of Market Interventions, and Lucy Castledine, Director of Consumer Investments Supervision, Policy and Competition.

FCA Explains Compliance 'Routes'

In the letter, the executives explained that the options available include publishing the promotion through an ‘authorized person’ or having it approved by an authorized person. FCA defines an ‘authorized person’ as an entity or individual authorized to carry out a regulated activity under the Financial Services and Markets Act (FSMA) 2000.

The last two options are to communicate the promotion through a crypto firm registered under the UK money laundering regulation or apply the exemption provided by the Financial Promotion Order of the FSMA. Promotions covered by the rules include website, mobile app and social media posts as well as online advertising.

In early July, FCA disclosed that it was finalizing regulations around cryptocurrency marketing and advertising in the country. The rules were proposed as the number of crypto holders in the UK more than doubled in the past year.

The financial watchdog noted that the new rules will require ‘clear risk warnings’ on any crypto advertisements or promotions. It will also ban investment incentives that came in the form of ‘refer to a friend’ or ‘new joiner bonuses’ schemes.

FCA Calls for Preparation

Meanwhile, McLoughlin and Castledine in the letter released on Monday noted that crypto asset firms, including those based overseas but marketing to UK customers, can get ready for the new regime by considering which of the four legal routes they can adopt and how they will meet the requirements of that route.

They also urged the firms to consider how they will deal with UK customers if they are unable to communicate their crypto-related promotions with them.

“We expect 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,” the FCA executives added.

Furthermore, the FCA leaders noted that they expect companies that decide to no longer offer their services to UK consumers to “have in place orderly wind-down plans to minimize any impact on UK consumers.”

Moreover, they pointed out that putting out crypto promotions without following any of the four stated routes will be considered a criminal offence punishable by up to 2 years imprisonment, an unlimited fine, or both. Other measures will include ordering the shutting down of websites, social media accounts and apps, among others.

Meanwhile, UK monarch, King Charles III last week approved as law a new bill that classifies the trading of cryptocurrencies as a regulated activity and brings stablecoins under the scope of payment rules. The bill also includes measures to control the promotion of digital assets.

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