The FCA wrote to unregistered firms marketing digital assets in the U.K. on July 4, reminding them to comply with new digital asset promotion rules, which come into force on October 8. Failure to do so will be considered a criminal offense.
“From 8 October 2023 all firms marketing cryptoassets to UK consumers, including firms based overseas, must comply with the financial promotion regime,” the FCA’s letter read.
The FCA introduced the financial promotion regime on June 8. Under the new rules, any promotion of digital currency products or services needs to attach a ‘clear warning,’ notifying investors of the high-risk nature of the assets and potential losses; firms marketing digital assets to U.K. consumers need to introduce a 24-hour cooling-off period for first-time investors to allow them to consider, and possibly back out of, potentially unwise investments; and promotions can only be communicated via certain legal routes, set out by the FCA.
“The new rules mean crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto,” stated the FCA when announcing the regime in June.
Tuesday’s letter outlined the four lawful routes firms can take to communicate digital asset promotions in the U.K.:
- The promotion can be communicated by an “authorized person,” as defined by the FCA. This includes ICVC, the Society of Lloyd’s, and persons with Part 4A permission.
- An unauthorized person can communicate a promotion that has been approved by an authorized person.
- The promotion can be communicated by a digital asset business registered with the FCA under the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLRs).
- The promotion meets the conditions of an exemption in the Financial Promotion Order.
Promotions not using one of these legal routes will be considered in breach of the new regime and thus “a criminal offence punishable by up to 2 years imprisonment, an unlimited fine, or both.”
The FCA said it expected most digital asset firms to go the route of registering with the FCA via the MLRs. However, it warned those considering this route to be prepared for a lengthy application process, a registration fee, and a potential wait of up to three months.
“All firms marketing to UK consumers… must get ready for this regime,” said Jayson Probin, crypto financial promotions lead at the FCA, in a statement announcing Tuesday’s regulator’s warning letter. He went on to praise the incoming promotion regime as “a critical change for the industry.”
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