On 2 November 2023, the Financial Conduct Authority (FCA) published its finalised non-handbook guidance on cryptoasset financial promotions (the guidance) (FG23-3 Finalised non-handbook guidance on Cryptoasset Financial Promotions). This follows the new rules on the promotion of cryptoassets that took effect from 8 October 2023 (PS23/6 Financial promotion rules for cryptoassets; seeNews brief.
The guidance itself:
- Clarifies how firms can comply with the new cryptoasset promotion rules.
- Confirms that firms acting in accordance with the guidance will be treated as compliant.
Who should read the guidance?
Firms that approve cryptoasset promotions must ensure that they comply both with the relevant financial promotion rules in the FCA's Conduct of Business sourcebook as well as relevant rules under the new consumer duty (see " Consumer duty" below and feature article "The FCA consumer duty: breaking new ground"). This is despite the vast majority of cryptoasset firms not being subject to the consumer duty as unauthorised firms.
Fair, clear and not misleading
The critical requirement is that financial promotions must be fair, clear and not misleading. To meet this requirement any person promoting cryptoassets will need to have a clear understanding of what they are promoting and take every care with the content of promotions and the way in which information relating to those cryptoassets is promoted (see "Factors to consider" below).
Stand alone compliance
The FCA expects promotions to be "stand-alone compliant", meaning that each stage of a financial promotion must comply with the rules. Helpfully though, firms may include links that provide access to supporting information or additional disclosures, particularly for complex investments. However, holding back information on key risks until later stages of the consumer journey would be a breach of the rules.
Authorised firms are required to consider their obligations under the consumer duty in how it applies to cryptoasset promotions. The consumer duty builds on the central requirement that promotions are fair, clear and not misleading, and has raised the bar in all areas of retail financial services. Of particular significance are the consumer duty's cross-cutting rules consisting of obligations to act in good faith, avoid causing foreseeable harm and support retail consumers to pursue their financial objectives.
The consumer duty means that cryptoasset promotions must be delivered by an appropriate method over suitable communication channels and must, in respect of the intended consumers:
- Address their specific information needs.
- Be capable of being understood by them.
- Enable properly informed decision-making.
- Take account of vulnerabilities.
The FCA does not expect firms to protect their customers from risks that they reasonably believed the customer understood and accepted, such as investment losses, but questions may be raised if all, or a significant proportion, of their customers are losing money.
Diversity of cryptoassets
The diverse variety of cryptoasset products and services, together with the diverse nature of the consumer audience, means that promoters must consider the specific nature and risk profile of the product or service before publishing any promotions.
Caution should be taken with any promotions that are linked to stablecoins or other forms of cryptoasset that purport to offer stability or link to fiat currency (see Briefing "Stablecoins and central bank digital currencies: a developing landscape"). Any such claims should be subject to an appropriate level of due diligence so that the person making them can demonstrate to the satisfaction of the FCA that they are genuine. The FCA has confirmed that it will regard cryptoassets that claim stability by relying on algorithms or a resource of other cryptoassets to be non-compliant with the rules.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.