Bybit Exits UK Market, Rival Crypto Exchanges Partner with Local Firms
Two weeks after Bybit’s exit from the UK market due to new crypto marketing rules, several overseas exchanges have found a way to adapt by partnering with local firms. Coinbase and OKX are working with Archax to get their financial promotions approved, while Binance has partnered with Rebuilding Society, a regulated peer-to-peer lending firm. These arrangements allow the exchanges to continue serving UK customers despite the new regulations from the Financial Conduct Authority (FCA), which include a cooling-off period for first-time investors.
According to George Morris, a partner at Simmons & Simmons law firm, when the approvers enter into an arrangement with the exchanges, they take responsibility for approving and overseeing the promotions. It becomes a symbiotic relationship.
HTX and KuCoin Added to FCA Warning List
The FCA issued a warning on October 8, listing 143 entities operating in the UK without permission. Among them are HTX and KuCoin, two major global exchanges. The FCA specifically stated that these firms may be promoting financial services or products without their permission, advising people to avoid dealing with them.
Graham Rodford, CEO of Archax, noted that before the new marketing rules, offshore exchanges could freely offer services in the UK. However, the financial promotions rules now have a wider reach. Archax has taken on about half of the clients seeking assistance in getting their promotions approved.
FCA’s Financial Promotions Regime
The FCA’s new regime for crypto asset financial promotions took effect on October 8. The core rules will come into effect from October 8, 2023. Under these regulations, unregistered crypto asset firms have four routes to lawfully communicate promotions within the UK. They can be communicated by an FCA-authorized person, approved by an authorized person, communicated by a crypto firm registered under the FCA’s anti-money laundering regulations, or comply with the conditions of an exemption in the Financial Promotion Order.
Failure to comply with the new financial promotions guidelines can result in a criminal offense, punishable by up to two years imprisonment, an unlimited fine, or both.
Hot Take: Implications of Partnership with Local Firms
The partnership between overseas exchanges and local firms is a strategic move to navigate the new crypto marketing rules imposed by the FCA. By collaborating with approved entities, exchanges like Coinbase, OKX, and Binance can continue serving UK customers while ensuring compliance with the regulations. This approach allows for shared responsibility in approving and overseeing financial promotions. However, it remains to be seen how effective these partnerships will be in maintaining the accessibility and competitiveness of the UK crypto market amidst increasing regulatory scrutiny.
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