Dear Sir/Madam | Release Date: 21st 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 issued a final warning to cryptoasset firms, including those based overseas, that market to UK consumers. This warning emphasises the impending enforcement of the financial promotion regime which includes cryptoassets within its scope. All relevant firms must comply with this regime once it becomes active.
The financial promotion regime aims to protect UK consumers from potential harms associated with cryptoasset investments that may not align with their risk profiles. The regime will require all marketing communications, including those made through websites or apps, to provide fair, clear, and not misleading information, enabling consumers to make informed investment decisions.
Despite outreach efforts including multiple warnings, letters, and industry engagements, there has been a notable lack of engagement from many unregistered, overseas cryptoasset firms. This poor engagement raises concerns about these firms’ readiness to comply with the new regime and their commitment to consumer protection.
Once the regime is in force, unauthorised and unregistered crypto businesses will only be allowed to communicate financial promotions if these have been approved by an authorised person or fall within specific exemptions. Violations of the regime, such as engaging in unauthorised promotions, will be met with strict enforcement actions including potential criminal charges, fines, or imprisonment.
The FCA has also highlighted the role of intermediaries such as social media platforms, search engines, app stores, and payment firms in facilitating these promotions. These intermediaries are urged to ensure they do not support illegal financial promotions and must carefully consider their obligations under the Proceeds of Crime Act 2002, which includes reporting suspicious activities and avoiding money laundering practices.
For unregistered firms, the FCA advises immediate action to halt illegal promotions and to implement robust systems to prevent UK consumers from accessing unauthorised promotions. These firms must also manage communications with existing UK customers carefully, ensuring any interaction is factual and does not constitute a financial promotion.
In summary, the FCA is reinforcing its commitment to a regulated and safe cryptoasset market by setting strict compliance requirements for financial promotions. Cryptoasset firms and their intermediaries are expected to take immediate and decisive actions to align with these regulations to avoid severe penalties and legal actions. This ensures a fairer, transparent, and consumer-focused market environment.