The Financial Conduct Authority (FCA) has updated its guidance for crypto asset firms in response to recent legislative changes bringing crypto promotions targeting UK consumers under its oversight. The FCA’s objective with these new rules is to improve consumer understanding of crypto investments and their associated risks. It’s worth noting that over 200 crypto firms failed to comply with the fundamental requirements when these regulations came into effect.
Cryptoasset firms in the UK are now navigating this revised regulatory landscape with the FCA’s latest guidance. This guidance, developed following extensive industry consultation, aims to assist firms in adhering to the updated marketing rules and integrating the “Consumer Duty” act into their promotional activities.
Lucy Castledine, the Director of Consumer Investments at the FCA, emphasized the alignment of these new crypto marketing rules with those governing other high-risk investments. The FCA has actively sought industry feedback to refine these rules and accompanying guidance, recognizing the valuable insights gathered during the consultation phase.
Financial Conduct Authority’s Support and Transition Period
Acknowledging the rapidly evolving nature of the crypto sector and the global regulatory environment, the FCA commits to ongoing engagement with industry players and periodic reviews of its guidance. The FCA had previously provided examples to distinguish between good and poor marketing practices in preparation for the new financial promotion rules, which have been in effect for almost a month.
Despite these new rules, the FCA maintains its stance on the high-risk nature of crypto assets, cautioning investors to be prepared for the possibility of total investment loss. The FCA’s “Warning List” continues to serve as a resource for consumers, helping them identify unauthorized firms and make more informed decisions regarding crypto investments.
Additionally, the FCA has introduced a modification by consent, offering registered or authorized cryptoasset firms a transitional period to implement certain technical aspects of the new rules. Firms have until January 8, 2024, to incorporate features such as the 24-hour cooling period, client appropriateness testing, and client categorization. All other aspects of the financial promotions regime have been in effect since October 8, 2023.
As part of these changes, firms promoting cryptoassets in the UK must now be authorized or registered by the FCA, or have their marketing approved by an authorized firm. This alignment with the rules for other high-risk investments follows extensive collaboration with the government, international counterparts, and the industry.
The FCA has been actively preparing firms for these changes since February and is adopting a proportionate approach to enforcement for firms that genuinely work towards compliance. In the initial two weeks of implementing the marketing rules, the FCA issued 221 alerts, highlighting common issues in crypto marketing.
Looking ahead, the FCA plans to release a Discussion Paper on the regulation of stablecoins for payments in the UK, inviting stakeholders to participate in the discourse. This move underscores the FCA’s commitment to shaping a regulatory framework that keeps pace with the dynamic crypto market.
