Financial Conduct Authority issues new guidelines on marketing crypto assets

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On July 4, 2023, the UK’s Financial Conduct Authority (FCA) issued a letter regarding financial promotion rules for crypto-assets effective as of October 8, 2023. The new guidance supplements the policy statement previously issued by the FCA applying the UK Financial Promotions Regime “to all companies marketing crypto-assets to UK consumers, regardless [sic] find out if the company is based overseas or what technology is used to promote.

Promotions of crypto assets will be brought under the Financial Services and Markets (FSMA) Act 2000 by the Financial Services and Markets (Financial Promotion) Act 2000 (Amendment) Order 2023 ( the “Variation Order”) which is due to come into force on 8 October 2023. As set out in the FSMA, financial promotion encompasses a wide range of activities, including electronic communications and communications made from outside the UK UK, even where not directed solely at UK consumers, if the communication is likely to have an effect in the UK. When the Variation Order comes into effect, there will be only four avenues to legally market eligible (fungible and transferable) crypto assets to UK consumers:

Promotion by an authorized person (meaning (a) a person who has been authorized by the FCA or the Prudential Regulatory Authority (PRA) to engage in one or more regulated activities (as defined in the PRA Handbook), (b) an open-ended investment company, or (c) the Society of Lloyd’s); Promotion by an unauthorized person approved by an authorized person; Promotion by a crypto-asset business registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Payer Information) Regulations 2017; or Promotion that otherwise meets the terms of an exception in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

By October 8, companies marketing crypto assets to UK consumers should determine which of the above four avenues they will use. In its letter, the FCA said it “expects[s] that most, if not all, crypto asset companies with retail clients in the UK will be within the scope of the [financial promotions] regime.” Persons who violate these rules will be subject to criminal prosecution and risk up to two years in prison, an unlimited fine or both. The FCA may also take other measures such as (but not limited to ) placing companies on its warning list, taking action to remove or block illegal financial promotions by requesting removal from websites, social media or apps, and enforcement action.

We will continue to monitor developments in the digital asset and blockchain technology industry and provide Friends of the Company with updates as they become available.

Trainee attorney Emily Simmons also contributed to this blog post.

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