The Financial Conduct Authority (FCA) has unveiled a “finalised non-handbook guidance” document on Cryptoasset Financial Promotions. This release followed observed lapses in adherence to the new laws governing crypto asset promotions, which took effect on October 8, 2023.
On June 8, 2023, the pertinent legislation concerning cryptoasset financial promotions was enacted, and subsequent rules were published under the identifier PS23/6. Central to these rules is the stipulation that financial promotions must embody fairness, clarity, and accuracy to prevent misleading the public. In tandem with these final rules, a consultation on the proposed Guidance was also issued to ensure firms grasp the nuances of this requirement as it pertains to crypto asset promotions.
The consultation phase came to a close on August 10, 2023, paving the way for the FCA to review the feedback and finalize the Guidance which is detailed in Chapter 2 of the document. This finalised Guidance, published on November 2, 2023, doesn’t introduce new obligations but elucidates the existing regulatory obligations of firms. It emphasizes that adherence to this Guidance will be deemed as compliance with the relevant rule or requirement, although it’s not mandatory to follow the Guidance to achieve compliance.
A noteworthy mention in the document is the introduction of a secondary international competitiveness objective, activated on August 29, 2023. Although this objective wasn’t in effect during the publication of the final rules, its spirit was considered in PS23/6. This objective aligns with the broader policy to shield consumers while fostering beneficial innovation that potentially fuels long-term economic growth in the UK.
The Guidance underscores the primary aim of mitigating consumer harm by clarifying the expectations of firms, thereby promoting better compliance with the relevant rules. By doing so, it aims to prevent the erosion of trust in financial services that may arise from consumers not fully grasping the risks associated with cryptoasset purchases. Through clearer and fairer promotions, consumers are envisaged to make well-informed decisions that resonate with their risk profiles and needs.
The transition hasn’t been smooth, with reports indicating a dismal degree of compliance since the rules came into play. Some market participants have even expressed intentions to exit the UK market due to the perceived restrictive nature of these laws. The FCA, however, has been proactive in issuing multiple warnings and reminders since June 8.
Moreover, certain significant technical benchmarks have been slated for January 8, 2024. Amid these developments, the FCA’s Guidance also touches on the Travel Rule, formulated by the Financial Action Task Force, and its implementation in the UK on September 1.
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