The UK Financial Conduct Authority (FCA) published the new rules applicable to all firms marketing cryptoassets to UK consumers. In particular, these rules are set to bring cryptoassets into the financial solicitation/promotion regime as of 8 October 2023.
The Financial Conduct Authority (FCA) reported a growing and worrying mismatch between consumers' investment decisions and their level of risk tolerance and therefore decided to categorise cryptoassets under "Restricted Mass Market Investments", in order to ensure an adequate level of protection for consumers, without, however, stifling a market that is still developing.
The new rules are expected to take effect on 8 October 2023 and will bring cryptoassets within the scope of the financial solicitation/promotion regime. The definition of financial promotion needs to be interpreted extensively, as it covers several different types of communications made by a company, including those published on websites, apps or made via social media and online advertising. Furthermore, any promotional activity originating outside of the United Kingdom will also be covered by the promotional rules if it has an effect on the UK consumers, even when such activity is not exclusively addressed to them.
There will be four routes to promote cryptoassets to UK consumers:
(i) Financial promotions made by a FCA-authorised person
(ii) Financial promotions made by an unauthorised person, but approved by an authorised person
(iii) Financial promotions made by those having business relations concerning cryptoassets registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
(iv) Financial promotions falling under an applicable exemption under the Financial Promotion Order
Any violation of these rules shall be considered as a criminal offence punishable by up to 2 years of imprisonment, the imposition of a fine, or both.
The FCA noted, however, that a cryptoassets' investment offer may comply with applicable rules without necessarily making the consumer aware of the risks related to the investment. For this reason, these new rules have a 24-hour cooling-off period, which necessarily takes into account the peculiarities of the crypto market, characterized by rapid price fluctuations.
The UK Financial Conduct Authority's resolution is part of the broader European and probably global trend that is moving toward increasing recognition of cryptoassets as alternative investment strategies to traditional assets.
Originally Published by 29 September 2023
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