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FCA’s new promotion rules will leave crypto firms in ‘regulatory limbo’, UK industry body warns

Consumer duty was introduced a year ago, and becomes mandatory from today
Consumer duty was introduced a year ago, and becomes mandatory from today

The Financial Conduct Authority’s crackdown on marketing of high-risk investments to consumers will leave crypto firms in “regulatory limbo”, the UK’s FinTech industry body warned.

The FCA laid down stricter rules to deal with “misleading” ads that encourage investment in risky products and tighter requirements for companies doing so, but crypto was not included in these rules as it falls outside the FCA’s remit. The watchdog said it would set final rules for cryptoasset promotions once the UK Treasury makes the relevant legislation.

FinTech industry body Innovate Finance said that this lack of clarity for crypto promotion would hurt crypto activity in the UK.

“The combination of FCA’s proposals with the existing wider regulatory framework set by HM Treasury means that crypto asset service providers would face a regulatory limbo, unable to get approval for compliant promotions and therefore unable to market themselves in the UK,” said Adam Jackson, Director of Policy at Innovate Finance. 

“This would be good for neither consumers nor industry innovators.”

Under the new rules, firms will need to intensify their risk warnings and ban inducements to invest. Firms will also be required to carry out better checks to ensure the investment products on offer align with customers’ needs. In order to approve or issue marketing materials, firms will need to have the appropriate expertise in place. 

The FCA’s requirements have to be followed by firms promoting high-risk investments and could be similarly applied to crypto. “Subject to any changes in circumstances, we expect to take a consistent approach to cryptoassets to that taken for other high‐risk investments,” the FCA said.

“The rules continue to apply a one-size-fits-all approach to investments that have entirely different risk characteristics,” said Mike Carter, Head of Platform Lending and Investment at Innovate Finance. 

He said the FCA would wait on any rule changes until the Treasury concluded its review of “high net-worth” exemptions as well as its own review into high-risk investment categorization”.  

“This piecemeal approach to regulation is unhelpful for innovation. We will continue to work with members to help shape these further proposals and navigate the new regime.”