The FCA Releases Guidance on Cryptoasset Financial Promotions
The Financial Conduct Authority (FCA) has recently published a “finalised non-handbook guidance” document on Cryptoasset Financial Promotions. This release comes after the FCA identified instances of non-compliance with the new laws governing crypto asset promotions, which came into effect on October 8, 2023.
New Rules for Fair and Accurate Financial Promotions
On June 8, 2023, legislation regarding cryptoasset financial promotions was enacted, and subsequent rules were issued under the identifier PS23/6. These rules emphasize the importance of fairness, clarity, and accuracy in financial promotions to prevent misleading the public. To help firms understand these requirements in relation to crypto asset promotions, a consultation on proposed guidance was also conducted.
Finalized Guidance for Compliance
The consultation period ended on August 10, 2023, allowing the FCA to review feedback and finalize the guidance detailed in Chapter 2 of the document. The finalized guidance, published on November 2, 2023, does not introduce new obligations but clarifies existing regulatory requirements for firms. Adherence to this guidance will be considered compliance with the relevant rules, although it is not mandatory to follow it.
Promoting Consumer Protection and Innovation
An important addition to the document is the introduction of a secondary international competitiveness objective activated on August 29, 2023. While this objective was not in effect when the final rules were published, its spirit was taken into account during their formulation. This objective aligns with the broader policy of protecting consumers while promoting innovation that can contribute to long-term economic growth in the UK.
Mitigating Consumer Harm and Building Trust
The main goal of the guidance is to prevent consumer harm by clarifying firm expectations and promoting better compliance with the rules. Clearer and fairer promotions are intended to help consumers make informed decisions that align with their risk profiles and needs, avoiding potential trust erosion in financial services. However, reports suggest that compliance has been poor since the rules came into effect, leading some market participants to consider leaving the UK market.
Upcoming Technical Benchmarks and Travel Rule Implementation
In addition to the guidance, the FCA highlights certain technical benchmarks scheduled for January 8, 2024. The guidance also addresses the implementation of the Travel Rule, set by the Financial Action Task Force (FATF), which will be enforced in the UK from September 1.
Hot Take: FCA Takes Steps to Ensure Fairness and Compliance in Cryptoasset Promotions
The FCA’s release of finalized guidance on cryptoasset financial promotions demonstrates its commitment to promoting fairness, accuracy, and consumer protection in the crypto industry. By clarifying regulatory obligations for firms and emphasizing clear and fair promotions, the FCA aims to prevent misleading practices and build trust among consumers. However, compliance with these rules has been lacking, leading to concerns about market participants leaving the UK. It is crucial for firms to understand and adhere to these guidelines to maintain a transparent and trustworthy crypto market in the UK.
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