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On February 1, His Majesty’s Treasury (HMT) published an update to its approach to the financial promotion regime of cryptoassets. This was published at the same time as the consultation on the future regulatory framework of cryptoassets – our full analysis can be found here. Both updates are welcome and provide positive clarity on the UK’s intention to become a fintech hub.
The UK government has listened to the crypto-asset industry’s concerns about changes to the proposed crypto-asset financial promotion regime. The outcome is a significant win for the industry, but also a strong indication of the UK’s commitment to making the country a global hub for cryptoassets.
The changes follow strong industry opposition to HMT and the FCA’s initial proposals, which came from both CryptoUK and the GDF. Industry representatives were concerned that the changes could result in cryptoasset firms ceasing to be marketed in the UK, as it would require their financial promotions to be approved by an appropriately authorized FCA firm.
This was clearly a significant challenge for the industry, as there were very few FCA authorized firms available to provide this service. Moreover, it could incur significant costs for the industry. This approach, therefore, ran counter to the UK’s stated ambition to become a global fintech hub.
As a result, there will be legislative changes that will give UK-registered cryptocurrency firms a time-limited exemption to be able to approve their own financial promotions. These powers will be drawn from the Financial Services and Markets Act and empower the FCA to deal with breaches of the financial promotions regime in a similar way as it regulates other promotions in the financial services market. UK cryptocurrency firms will not require further FCA authorization to approve their own promotions.
Non-UK cryptocurrency firms, however, will need to rely on a third party – such as an appropriate FCA-authorised law firm – to approve their financial promotions, if they are to have effect in the UK.
This is a positive step and signifies the UK’s intention to maintain high standards of investor protection and to have a sensible and pragmatic regulatory approach for the UK crypto asset industry.
We at Elliptic’s GPRG team are always happy to communicate with clients about our understanding of these and other crypto-related regulations. Email mark.aruliah@elliptic.co.
Compliance with Financial Services Regulations
