A breakdown of the latest updates from the UK FCA (Financial Conduct Authority) on the marketing of crypto assets, and what you need to know regarding advertising.
On January 18, 2022, the HM Treasury published a response to its consultation on the marketing of crypto assets. The consultation response sets out the UK government’s plan to introduce the promotion of crypto assets within the scope of financial promotions legislation.
As crypto asset ownership in the UK has continued to rise, the UK government aims to bring crypto assets under financial promotion legislation to protect consumers from misleading advertisements whilst ensuring consumers have the right information before making any investment decisions.
What does this mean?
It means an individual or business cannot communicate a financial promotion unless either the content of the promotion is approved by a firm that is authorized by the FCA or PRA authorized firm (if it falls under the FPO exemption). Any breach of these rules is considered a criminal offense.
Which crypto assets are in scope?
The criteria for qualifying crypto assets may include that it is fungible, transferable, not electronic money, and not a currency issued by a central bank or public authority. However, the UK government intends to include a ‘transferability exclusion’ within the definition to ensure tokens such as travel passes, lunch passes, and supermarket loyalty schemes stay out of scope.
Non-fungible tokens (NFTs) were considered to be out of scope mainly due to the “non-fungibility” characteristic. The HM Treasury considers “fungibility” as the main characteristic of a range of regulated financial services products, hence raising more concerns when it comes to consumer protection.
It is important to mention that the proposed definition of “qualifying crypto-assets” is provisional and that final drafting is under development.
What are the timescales and transition period?
The UK government intends to set a six-month transitional period from the publication of the proposed Financial Promotion Order regime.
