Financial promotions: final legislation, rules and guidance bringing cryptoassets within the financial promotion regime now published

Specifically, the Order expands the scope of the financial promotion restriction in section 21 of the Financial Services and Markets Act 2000 (FSMA) by amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) (FPO) to include financial promotions in respect of certain cryptoassets.

The Order, together with relevant FCA rules (see below) will provide for the regulation of in-scope cryptoasset financial promotions. The aim is to improve consumers' understanding of risks associated with cryptoasset investments and to ensure that cryptoasset promotions are held to the same standards as broader financial services.

In particular, the Order:

• creates a new “controlled investment” in the FPO, defined as a “qualifying cryptoasset”, and amends the list of relevant controlled activities to incorporate reference to qualifying cryptoassets.
• applies and modifies certain existing exemptions in the FPO to qualifying cryptoassets; and

• creates a temporary, limited exemption to the financial promotion restriction (imposed by section 21(1) of FSMA), for cryptoasset businesses (which are not authorised persons) registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692).

What does the Order mean for marketing of crypto assets in the UK?

• The UK financial promotion regime has a broad territorial scope – it applies to communications “capable of having effect in the United Kingdom” and therefore includes communications created overseas which are then capable of having effect in the UK.
• It is also worth keeping in mind that the FCA’s view on what constitutes a financial promotion is broad and can include websites accessible to UK consumers and social media targeted at UK consumers, irrespective of whether it is operated by a UK or overseas firm.
• Many UK firms in the cryptoasset industry do not have the relevant FCA authorisation to issue their own financial promotions and the current exemptions are unlikely to allow them to carry on their business as they wish, therefore these firms will need to identify an FCA/PRA authorised firm, with the relevant permissions that is willing to approve its financial promotions; this will have both timing and cost implications for them.

You can read our update on the draft Order here.

FCA publishes near final rules and supplementary draft guidance on financial promotions for cryptoassets

On 8 June 2023, the UK Government confirmed that the financial promotion regime should apply to cryptoassets from 8 October 2023. As part of implementing this regime, the Financial Conduct Authority (FCA) published:

• rules on financial promotions of cryptoassets; and
• its guidance on cryptoasset financial promotions.

The new requirements, rules and guidance are expected to come into force on 8 October 2023 and will apply to all firms marketing cryptoassets to UK consumers, whether based in the UK or overseas.

The proposed changes will significantly affect firms operating in the cryptoasset sector, including firms authorised, registered or operating from a place of business outside of the UK (and not within scope of the currently UK regulatory regimes for cryptoassets). Accordingly, firms should ensure that they are aware of the implications on their business and should prepare an implementation strategy ahead of the 8 October 2023 implementation date.

We will publish a detailed update on the FCA near final rules and guidance shortly.