Dear Sir/Madam | Release Date: 7th September 2023

To read a longer summary of this Dear Sir/Madam letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has communicated to firms involved in cryptoasset financial promotions regarding the new rules set to be effective from 8 October 2023, as detailed in Policy Statement PS23/6. These regulations aim to safeguard consumers by ensuring that crypto investments are made based on fair, clear, and non-misleading information, aligning with their risk appetite.

From discussions with various cryptoasset firms, it has become evident that firms are generally finding it challenging to prepare for the new financial promotions regime, particularly with the more complex ‘back end’ requirements such as personalised risk warnings, cooling-off periods, and client categorisation. These challenges are further complicated by the recent implementation of the Travel Rule. However, the ‘front end’ aspects of the promotions are reportedly easier to implement.

In response to the difficulties expressed by firms, especially those in global group structures requiring significant business model adjustments, the FCA is offering a modification by consent to delay the implementation of the more complex ‘back end’ rules by three months, to 8 January 2024. This adjustment aims to provide firms additional time to ensure compliance with the new standards without compromising the protection offered to consumers.

The FCA emphasises that all other aspects of the financial promotions rules, including the requirements for promotions to be fair and clear, will still commence on 8 October 2023. Firms are encouraged to apply for the modification by consent as soon as possible and are reminded of the severe implications of non-compliance, including potential enforcement actions.

Key takeaways and actions:

Firms should urgently review the FCA’s feedback and guidance to fully prepare for the upcoming changes. They need to ensure that all promotional activities meet the new regulatory standards by the respective deadlines. The FCA will actively supervise compliance and has expressed its readiness to take strict measures against any firms that fail to adhere to these rules. Firms intending to communicate or approve cryptoasset financial promotions must prioritise integrating these regulatory changes into their operational and compliance strategies.