The UK Financial Conduct Authority (FCA) is sending a clear message to crypto asset firms operating in the UK: Get ready for the new financial promotion regime or face serious consequences.
The FCA has issued a final warning to crypto firms marketing their services to UK consumers and those supporting them. This move comes as the UK government extends the financial promotion regime to cover certain crypto assets. The implications are significant; all firms, including those based overseas, engaged in marketing crypto assets to UK consumers must comply with this new regime.
The Challenge of Non-Engagement
However, the FCA has raised concerns about a significant number of firms in the crypto industry that have chosen not to engage with the regulatory body. In a survey sent to over 150 such firms, only 24 responded. This lack of engagement has raised red flags for the FCA.
The FCA's primary concern is that these unregistered firms may not be adequately prepared to comply with the new regime. Once it's in effect, unauthorized and unregistered crypto businesses will only be permitted to communicate financial promotions that have been approved by an authorized person or fall within specific exemptions in the Financial Promotion Order.
Legal Consequences of Non-Compliance
The implications of non-compliance are severe. If unregistered crypto asset firms continue promoting their services to UK consumers without proper authorization, they risk breaching section 21 of the Financial Services and Markets Act 2000 (FSMA). This could lead to criminal charges, including imprisonment for up to two years, an unlimited fine, or both.
FCA's Planned Actions
The FCA is not taking this issue lightly. They have outlined a series of actions to address illegal promotions:
Warning List: Firms promoting illegally to UK consumers may find themselves on the FCA's Warning List.
Removing Illegal Promotions: The FCA will take steps to remove or block any illegal financial promotions, including websites, social media accounts, and apps.
Enforcement Actions: In more serious cases, the FCA may resort to enforcement actions, which can include seeking injunctions from a court, demanding compensation, or even pursuing criminal prosecution.
Proceeds of Crime Act (POCA) Implications
The FCA also reminds businesses supporting unregistered crypto asset firms to consider their obligations under the Proceeds of Crime Act 2002 (POCA). They highlight the potential for benefits obtained from illegal financial promotions to be considered criminal property, posing risks for intermediaries.
Online Safety Bill (OSB) Impact
Once the Online Safety Bill (OSB) comes into effect, search engines and social media companies will be obligated to mitigate the risks posed by illegal content, including financial promotions, on their platforms. This legislation will be overseen by Ofcom in coordination with the financial promotions regime.
Compliance is Key
In summary, the FCA's message is clear: Compliance with the new financial promotion regime is non-negotiable for crypto asset firms targeting UK consumers. To remain on the right side of the law, firms must ensure their promotions are approved by authorized entities. Additionally, they must have robust systems in place to prevent UK consumers from accessing illegal promotions. Failure to comply could result in criminal charges and significant consequences for these firms.
Firms operating in this space are urged to take immediate action if they believe they may be in breach once the new regime takes effect. Stopping or blocking illegal promotions is essential to avoid regulatory action by the FCA. The crypto industry must embrace compliance to thrive in this evolving regulatory landscape.
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