The UK Financial Conduct Authority (FCA) has issued a letter to crypto asset companies outlining a new financial promotions regime. This legislation, which will come into force on October 8, 2023, requires all entities that market crypto assets to UK consumers, including those located abroad, to adhere to the new regime. The scope of this regulation extends to various forms of communication, such as websites, mobile applications, social media posts, and online advertisements.

The FCA has defined four legal pathways for crypto asset promotions to UK consumers to be legally communicated. These include promotions broadcast by an authorized person, those made by an unauthorized person but approved by an authorized person, promotions communicated by an FCA registered crypto business under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations ( Information about the Payer) 2017 (MLR), and promotions that meet the conditions of an exemption in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

The FCA has advised that promotions not following these pathways will breach section 21 of the Financial Services and Markets Act 2000 (FSMA). Such violations are considered criminal offenses and carry penalties of up to 2 years in prison, an unlimited fine, or both. The FCA has vowed to crack down on those who illegally advertise to UK consumers.

To help companies understand these new regulations, the FCA has published a Policy Statement (PS23/6) and Guidance Consultation (GC23/1). These documents are intended to clarify the standards required for financial promotions to be fair, clear and not misleading.

The FCA has encouraged all crypto asset companies marketing to UK consumers to be ready for the new financial promotions regime by October 8, 2023. Unregistered or unauthorized crypto asset companies are advised to consider which of the four legal pathways you will use for your financial promotions and how you will comply with the requirements of that pathway and associated FCA rules.

The FCA anticipates that the primary method for crypto asset companies to communicate financial promotions to UK consumers will be through registration with the FCA under the MLR. The FCA has provided information on the fight against money laundering and terrorist financing (LMA/CTF) and information for companies seeking to register under the MLR on their website.

The FCA has also clarified that it will not review or comment on draft documents as part of its assessment of an application and that poor quality or incomplete submissions will be rejected. The FCA has emphasized the importance of full disclosure of all relevant information and has advised that it takes any non-disclosure of information that may affect its assessment very seriously.