FCA issues final warning for cryptoasset firms
The City watchdog has issued a final warning for cryptoasset firms to comply with the new marketing rules.
The Financial Conduct Authority (FCA) announced in June that it was introducing marketing restrictions on the sector, which were all set to come into effect on 8 October.
The rules are similar to those imposed on the peer-to-peer lending industry.
However, earlier this month it said that cryptoasset firms can apply for an extension until 8 January 2024 to implement the 24-hour cooling off period, appropriateness tests and client categorisation features.
All other parts of the new rules – including clear risk warnings on websites and ensuring that adverts are clear, fair and not misleading – will still come into effect from 8 October 2023.
The FCA last week wrote to firms with a final warning, highlighting that they must get ready for the new regime or face “robust action”.
It said it is concerned by the poor engagement from many unregistered, overseas cryptoasset firms who have UK customers.
“Many of these firms have refused to engage with the FCA despite our best efforts,” the letter said, which was signed by Lucy Castledine, director of consumer investments supervision, policy and competition, and Matthew Long, director of payments and digital assets supervision, policy and competition at the FCA.
“For example, only 24 firms responded to a survey that was sent to over 150 firms.
“This lack of engagement gives us serious concerns about unregistered firms’ readiness to comply with the new regime. UK customers depend on communications from firms to access and deal with their cryptoassets and so it is important that all firms are ready to comply with the new regime when it comes into force.”
Failure to comply with the new rules could result in a criminal conviction punishable by up to two years imprisonment, an unlimited fine, or both.
The FCA also suggested that social media platforms and search engines could be at risk of punishment if they do not help protect UK consumers from illegal cryptoasset promotions.
It said that cryptoasset firms “are supported and facilitated by a host of intermediaries” which also include app stores, domain name registrars and payments firms that enable consumers to invest money with these firms.
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“All these intermediaries have a crucial role to play in protecting UK consumers from illegal promotions,” the FCA said. “We expect these firms to play their part in ensuring that illegal financial promotions are not communicated to UK consumers by unregistered cryptoasset firms.”
The regulator called on cryptoasset firms to “urgently consider their position” if they believe they are going to breach the new rules.
“If firms fail to comply with the requirements of the regime it is likely we will issue an alert against them on our website and we will seek to remove or block those financial promotions,” it said. “We strongly recommend firms seek legal advice to avoid committing a criminal offence and exposing themselves to potential enforcement action.”