The Financial Conduct Authority (FCA) has announced that companies should expect changes to the crypto regulatory framework. In a recent notice, the FCA said that the government released a policy statement on February 1 on how it will regulate promotions related to crypto assets.
FCA clarifies new UK regulations for crypto asset promotions
Earlier this month, the policy statement released by the UK government portrayed the government’s intention to exempt crypto businesses registered with the FCA from the Financial Promotion Order. This exemption will allow FCA-registered crypto asset businesses to promote their services to UK consumers.
The regulator said that if these changes are implemented, the promotions made by these businesses will be communicated by a person authorized by the FCA and comply with a wide range of other conditions, including the conditions of an exemption from the Financial Promotion Order.
The promotions that are not done in compliance with the rules will not comply with Section 21 of the Financial Services and Markets Act 2000, and the offense will be punishable by a prison sentence of up to two years. The FCA recently said that misleading promotions have increased by over 1300% compared to 2021.
8,582 financial promotions were amended or withdrawn in 2022 as a result of our intervention. This is an increase of 1398%, compared to 573 in 2021.
By using better #technology, we’re finding poor quality or misleading ads quicker https://t.co/eKisavqx4S pic.twitter.com/UKSEcwacvV
— Financial Conduct Authority (@TheFCA) February 3, 2023
“We will publish our final rules for cryptoassets promotions once the relevant legislation has been made. Subject to any changes in circumstances, we expect to take a consistent approach to cryptoassets to that taken in our new rules, in place from 1 Feb 2023, for other high-risk investments,” the report added.
The FCA has further reiterated that crypto assets are highly risky and that investors should be prepared to lose all their money if they choose to invest in the sector. The regulator also referred to the recent failure of crypto businesses, saying that these circumstances portrayed the risky nature of the industry. It also clarified that crypto investors are not eligible for compensation under the Financial Services Compensation Scheme.
In the recent report, the FCA clarified that crypto asset businesses needed to register under the money laundering rules and be subject to the requirements of MLRs as required by the regulator. The FCA noted that one of the businesses offering crypto asset services needed to be ready and organized by the time they made their application.
The FCA recently provided feedback to crypto firms alerting them about what makes good and poor quality applications. The regulator noted that out of the 300 applications made by crypto firms, only 41 applications had been approved.
Crypto advertisements in the UK
The UK boasts a vibrant crypto industry, with a recent study classifying London as the global largest crypto hub. The growth of the digital asset space is also driving the race to launch a central bank digital currency (CBDC), with the Bank of England saying it will release a digital pound by 2030.
JUST IN: Bank of England believes the UK will create a digital pound CBDC by 2030.
— Watcher.Guru (@WatcherGuru) February 4, 2023
However, the FCA has been strict regarding crypto advertisements, with regulators cracking down on crypto advertising. In June 2021, an advertisement campaign by Luno was banned after the Advertising Standards Authority said that the promotion was irresponsible and misleading.
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