Key Takeaways -
- FCA survey shows low engagement from crypto firms.
- New FCA rules on Oct 8th require authorized promo approval.
- Non-compliance risks severe penalties extended to supporters.
The Financial Conduct Authority (FCA) of the UK has recently sounded the alarm regarding the disengagement of crypto firms in regulatory matters. This concern is not limited to domestic companies but also extends to overseas firms operating in the UK market. With the introduction of new financial promotion standards just around the corner, the urgency for compliance has never been higher. This article aims to provide a detailed look into the FCA's growing concerns, the impending regulatory changes, and the broader implications for both crypto firms and their supporting intermediaries.
The FCA's Concerns
In an effort to gauge the industry's readiness for regulatory changes, the FCA conducted a comprehensive survey. The results were less than encouraging: out of 150 crypto firms contacted, a mere 24 took the time to respond. This lack of engagement is especially concerning among overseas firms that are actively marketing to UK consumers.
The New Regulatory Framework
Set to take effect on October 8th, the new regulatory framework will introduce a series of rules designed to standardize financial promotions. Importantly, these rules are not limited to firms based in the UK; they will also apply to companies operating from overseas but targeting UK residents. The regulations will govern promotional activities across a range of platforms, including but not limited to websites, social media channels, and various forms of online advertising. To be in compliance, unregistered crypto firms will need to have their promotional materials vetted and approved by an entity that is authorized by the FCA.
Navigating the Guidelines
To assist firms in this transition, the FCA has released a robust set of guidelines that outline the steps needed for compliance. Interestingly, these guidelines go beyond traditional financial promotions and extend to digital content like non-compliant crypto memes, which will now be considered as financial promotions under the new rules. Firms that choose to ignore these guidelines do so at their own peril, as non-compliance could result in severe penalties. These could range from up to two years of imprisonment to unlimited financial fines, or potentially both.
Beyond Crypto Firms
The FCA's warning is not solely directed at crypto firms; it also encompasses businesses that provide support to these unregistered entities. This broad category includes social networking platforms, app stores, search engines, and even payment processing companies. All of these intermediaries must be acutely aware of the risks associated with endorsing or hosting promotions for firms that target UK consumers with unauthorized financial promotions.
To underscore the gravity of the situation, the FCA has explicitly stated that businesses aiding unregistered crypto firms could find themselves in legal hot water. Specifically, they may be at risk of committing offenses related to money laundering under the UK's Proceeds of Crime Act 2002. This means that these intermediaries could unintentionally become involved in criminal activities through the fees they collect from hosting illegal promotions.