The United Kingdom’s Financial Conduct Authority (FCA) has issued a ‘final warning’ to crypto businesses, emphasising the need to comply with new financial promotion rules. However, a significant number of these businesses seem to be ignoring these regulations. The FCA’s concerns are detailed in a public letter, which states that out of over 150 firms surveyed, only 24 have responded regarding the new rules. These rules, set to take effect on October 8, will significantly restrict the way “unauthorised and unregistered crypto businesses” can communicate financial promotions to customers.
The FCA’s statement expresses concern over the lack of engagement from many unregistered overseas crypto asset firms that serve UK customers. It is considered a critical change, and the FCA insists that crypto firms “must cease making illegal financial promotions to U.K. consumers” once these rules are enforced. Failure to comply may result in severe penalties, including imprisonment for up to two years, unlimited fines, or both.
The rules are broad in scope, covering various forms of communication, including those made through apps and social media. The FCA has even outlined guidelines suggesting that crypto memes could potentially violate the promotion rules.
The lack of engagement and compliance among crypto firms has raised concerns within the industry. One prominent exchange, Bybit, was rumoured to be considering leaving the UK due to the challenges posed by these regulations. However, Bybit’s CEO clarified that compliance remained their top priority, and no final decisions had been made regarding their future in the region.
The FCA is not only targeting crypto businesses but also firms associated with non-compliant advertisements. This includes social media platforms, search engines, app stores, and payment companies, all of which could be held accountable for money laundering offences if they are linked to unregistered crypto firms.
The UK government has recently enacted legislation to regulate the promotion of crypto assets to consumers, aiming to protect citizens from making high-risk investments without adequate information. This financial promotion regime applies to all firms marketing crypto assets in the UK, including those based overseas.
The FCA has made significant efforts to assist crypto firms in complying with these regulations. They extended the compliance deadline to January 8, 2024, to allow for further technical development and published guidelines on best practices. However, their efforts have been met with a disappointing lack of cooperation from many unregistered overseas crypto firms.
The primary goal of these regulations is to ensure that consumers have access to fair and accurate information when making investment decisions regarding high-risk assets like cryptocurrencies. The penalties for non-compliance are severe, including potential criminal charges, placing violators on a warning list, and blocking or removing their promotions from various platforms. Contracts entered into with UK citizens by non-compliant crypto asset firms may also become unenforceable.
The FCA’s warning extends to intermediaries, such as social media platforms and search engines, which are expected to prevent illegal financial promotions by unregistered crypto firms from reaching UK consumers. The newly passed Online Safety Bill (OSB) will place further responsibilities on these intermediaries to mitigate the risks associated with illegal content, including illicit financial promotions.
Despite ample time for preparation and guidance from the FCA, the crypto industry faces significant challenges in adapting to these regulations. The FCA’s strong message emphasises the importance of compliance with these rules and the potential consequences for those who fail to do so.