Crypto firms told they have three months to fall in line with FCA’s new marketing rules
A slew of tough new Financial Conduct Authority rules aimed at making the marketing of digital assets clearer came into force today.
The move will see the implementation of a 24-hour ‘cooling off period’ for investors, as well a ban on incentives such as ‘refer a friend’ bonuses.
However, while the core rules came into effect this morning, registered crypto firms could be given until January 8 2024 to introduce features which may require further technical development.
Firms must first apply for the flexibility which would then allow them time to make the required back-office changes successfully.
As of today, the FCA says UK consumers will have greater protection as crypto asset firms’ marketing must be ‘clear, fair and not misleading’, labelled with prominent risk warnings and must not inappropriately incentivise people to invest.
“From this October, crypto firms must market to UK consumers clearly, fairly and honestly. And they must provide risk warnings people understand,” said Lucy Castledine, Director of Consumer Investments at 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.”
The authority warns that anyone who continues to promote crypto assets to UK customers beyond today’s deadline without complying with the rules, may be committing a criminal offence punishable by an unlimited fine and/or up to two years imprisonment.
Several of the UK’s major crypto asset firms have already sounded their compliance with the latest rules, as have international digital asset businesses which supply services to UK customers.
As Simon Barnby – Chief Marketing Officer with London-based exchange Archax – explained, firms providing crypto services to UK retail investors, who are not on the FCA Crypto Asset Register, are affected, regardless of where they are based.
“Those firms basically have three choices to be compliant: 1. withdraw from the UK market and stop providing services here, or 2. Go through the process of getting registered (takes time), or 3. get their financial promotions activities signed off by a s21 Approver,” he said.
“Archax is one of the few s21 Approvers around and we have signed up 10+ clients for our FinProms service – including some of the largest, most credible crypto exchanges – and have a pipeline of others looking to join. Some firms have already decided to exit the UK market as a result of these new regulations – such as ByBit.
“Others appear to be planning to continue to offer services and see what happens – it will be interesting to see what the FCA’s approach to these will be, particularly as these firms are based outside of the UK.
“The market will be closely watching for the FCA’s reaction next week, when the rules are live, given their last letter expressing disappointment at how seriously the new rules were being taken.
“On a higher level, how these rules impact the perception of the UK’s ambition to be a crypto hub will be keenly observed, although cleansing the market of service providers who cannot comply with KYC/AML processes and who market to retail consumers unfairly has to be a good thing.”