Cryptoasset firms financial promotions regime: are you ready for Monday 9th October?
The new rules on advertising certain cryptoassets come into effect on Monday. These new rules mean that you cannot promote cryptoassets in the UK unless you meet the regulatory requirements. This means you must:
Already be FCA authorized so you can approve your own promotions;
Already be registered as a Cryptoasset firm under the Money Laundering Regulations with the FCA;
Have arrangements in place for an FCA authorised firm to approve your promotions for you; or
Have assurance that your advertising falls within one of the financial promotion exemptions.
If you can’t say yes to one of the options above, then before Monday you need to have taken action to ensure you have stopped all promotional activity in the UK otherwise you will be committing a criminal offence. This will have a significant impact for firms in this position and they will need to consider their business models and whether their routes to market are compliant. Frankly it is too late now to take action to comply before the deadline as all the options above take time to put in place, so firms will need to make some very difficult decisions i.e. to cease certain activities.
What should firms do immediately?
If you are in the position where you cannot promote in the UK from Monday, you will need to ensure all your financial promotions are removed before that date; this includes all forms of media and types of advertising. Make sure you understand exactly what a financial promotion is defined as and identify which of your advertising might fall within that definition. There is a lot of guidance available in terms of what constitutes a financial promotion and you should make sure you have a detailed understanding of this. If you choose not to take down material because you don’t think it is a financial promotion, you should be prepared to engage with the regulator and explain why. You can expect the FCA to take a very tough stance on this.
Don’t just think about your own website and social media – you should also consider other intermediaries who may promote your services and make sure they remove any promotional material.
If you are a firm operating outside the UK, you must make sure you have controls in place to prevent UK consumers from accessing and responding to your promotions.
What are the consequences if a firm doesn’t comply?
Firstly and most importantly, you are likely to be in breach of section 21 of the Financial Services and Markets Act (FSMA) 2000. This is a criminal offence punishable by up to two years in prison, an unlimited fine or both. It’s also worth noting that as a result of Section 30 of FSMA, any contracts you enter into as a result of an unlawful promotion may also be unenforceable against a UK consumer.
Secondly the FCA has a range of different sanctions it can apply. This can include putting your firm on a public warning list and taking steps to block your promotions on websites, social media and apps. They can also take enforcement action against you and ultimately proceed with a criminal prosecution. Any of these interactions with the FCA will cost you significant time, resource and money.
How is the FCA even going to find my advertising?
You can bet that the Financial Promotions team at the FCA will be geared up and ready for action on Monday morning. They have many different sources and tools which they can use to find advertising material, and cryptoasset promotions will be receiving a significant level of focus and resource. The regulator has been crystal clear about their expectations and the consequences of any breaches, so it’s likely they will be looking to flex their muscles at the earliest opportunity and make an example of some non-compliant firms.
How can Ayse help?
If you find that you are in the position where you need to immediately stop your advertising, you’ll need to choose one of the four routes to market above. If you decide to proceed with Cryptoasset Registration under the Money Laundering Regulations we can help you. We have unique insights into this process and are currently supporting a number of Cryptoasset firms with their FCA applications to maximise their chances of success – click here to find out more.
We are already advising clients across a number of sectors on how to ensure that their financial promotions meet the FCA Financial Promotions Regime. Our regulatory experience when it comes to cryptoasset compliance is second to none – whether it’s your AML obligations or financial promotions, our experience and approach sets us apart. Get in touch to understand how and why.
