- The new legislation affects all companies marketing crypto assets to customers in the UK
- They can advertise via an FCA-authorized entity or a crypto company registered under money laundering regulations
In January last year, the UK government announced plans to adopt new laws on promoting crypto assets, which would be applied by the UK Financial Conduct Authority (FCA). The new legislation would affect all companies marketing crypto assets to customers in the UK regardless of whether they are based abroad or what apps they use to advertise their products.
Specific regime for crypto asset promotions
On February 6, the FCA posted a policy statement on its promotion regulation approach. Crypto companies that are registered with the FCA under applicable money laundering regulations can promote their products to UK consumers subject to a specific regime.
When this regime takes effect, there will be four ways to advertise crypto products to UK consumers:
· Via an FCA-authorized entity
· Via a crypto company registered under money laundering regulations
· With approval by an FCA-authorized entity.
· If the promotion complies with the exemption terms of the Financial Promotion Order.
Companies that do not advertise via one of the above routes will be found in violation of section 21 of the Financial Services and Markets Act and will face up to two years in prison. Firms must also include concrete risk warnings and other measures in their promotional activity, such as a 24-hour cool-off period. Their promotions must be fair and clear and must not mislead customers. The FCA warns:
Crypto assets remain high risk. We have repeatedly warned that consumers should be prepared to lose all of their money if they buy crypto assets. Recent events such as the high-profile failure of several crypto asset firms further highlight the riskiness of these products. There is unlikely to be any compensation under the Financial Services Scheme for consumers who lose money.
The regulator added that they would take decisive action if they saw companies advertising crypto products to UK customers in violation of promotion regime requirements. This might include taking down sites or other enforcement actions or issuing public warnings.
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