- The FCA’s finalised guidance on cryptoasset financial promotions aims to help firms comply with the financial promotion rules that came into force in October 2023.
- The guidance sets out expectations and guidelines relating to firms’ existing regulatory obligations and covers topics such as the fair, clear, and not misleading requirement, the Consumer Duty, due diligence, disclosure, and social media promotions for different types of cryptoassets and models.
- The guidance is relevant to authorised persons, persons registered under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and other persons involved in the communication of cryptoasset financial promotions, and applies to any communication that is capable of having an effect in the UK.
- Firms should conduct thorough due diligence on the cryptoasset being promoted to ensure promotions are presented in such a way that consumers are equipped to make clear, informed, and considered decisions.
- The guidance also highlights the application of the Consumer Duty to cryptoasset financial promotions, which builds on and goes further than the existing disclosure rules, and requires firms to act to deliver good outcomes and avoid causing foreseeable harm to retail customers.
- Firms should ensure that promotions of cryptoassets that claim a form of stability, or that claim to be backed by a commodity or an asset, are fair, clear, and not misleading, and disclose the relevant risks, evidence, and terms of redemption.
- Firms should also take particular care when making financial promotions on any electronic media platforms that might be capable of having an effect in the UK.
The Financial Conduct Authority (FCA) has published its “Finalised non-handbook Guidance on Cryptoasset Financial Promotions” (fg23-3) (the Guidance). The Guidance aims to help firms comply with the financial promotion rules for cryptoassets which came into force in October 2023 (PS23/6), particularly the core requirement that financial promotions are fair, clear and not misleading.
The Guidance does not impose new obligations on firms but sets out expectations and guidelines relating to firms’ existing regulatory obligations regarding the communication and approval of cryptoasset financial promotions. The FCA advises that a person who acts in accordance with the Guidance will be treated as having complied with the relevant rule or requirement to which that guidance relates.
The Guidance covers a range of topics, including:
i. The context and scope of the cryptoasset financial promotion regime and the Guidance
ii. The implications of the fair, clear and not misleading requirement for different types of cryptoassets and cryptoasset-related models
iii. The application of the Consumer Duty to cryptoasset financial promotions
iv. Considerations for financial promotions on social media platforms
v. Due diligence requirements on cryptoassets or cryptoasset services being promoted
vi. Disclosure requirements relating to regulated status and ownership of promoted cryptoassets
Relevance of the Guidance
On 8 June 2023, the FCA published a policy statement on the financial promotion rules for cryptoassets (PS23/6). The Guidance sets out the FCA’s views on potential approaches firms might take to ensure that financial promotions relating to qualifying cryptoassets comply with these rules. The Guidance is relevant to.
i. Authorised persons who communicate or approve financial promotions relating to qualifying cryptoassets
ii. Persons registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) (MLR registered persons) and who communicate financial promotions relating to qualifying cryptoassets relying on the exemption in article 73ZA of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO)
iii. Other persons involved in the communication of financial promotions relating to qualifying cryptoassets, including cryptoasset firms who are not MLR registered persons, social media influencers, and platforms.