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Home Crypto

UK Regulator Warns that Crypto Firms Could Face Prison Time for Unauthorized Ads

BlockNews Team by BlockNews Team
February 7, 2023
in Crypto, Finance, Media, Social
Reading Time: 3 mins read
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  • Crypto companies will now follow four routes to communicate adverts to customers.
  • Companies registered with FCA under the MLR 2017 will be exempted from the Financial Promotion Order.
  • Breach of the new advertisement guidelines will result in prison time, among other disciplinary measures.

The Financial Conduct Authority (FCA) has announced that crypto asset companies in the UK will soon need to follow the new financial promotions guidelines.

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In January 2022, the UK government handed over the regulation of crypto assets advertising to the FCA, detailing its approach in a published consultation response.

In the consultation, the government explained its rationale for expanding the scope of the Financial Promotion Order to include crypto assets. It cited the “evidence of risk to consumers” as a strong case for intervention, warranting the inclusion of crypto in the FPO.

The rule applies to all firms marketing crypto assets to UK consumers regardless of location or the underlying technology.

Additionally, the recently published policy statement by the government outlines its intention to introduce an exemption in the Financial Promotion Order. This includes crypto businesses registered with the FCA under the MLR Regulations 2017.

The policy allows crypto companies in this category to communicate their crypto asset financial promotions to UK consumers. Other businesses will be required to have their advertisements approved by an authorized person under the Financial Services and Markets Act 2000.

Meanwhile, authorized persons, crypto asset exchanges, and custodian wallet providers do not need the exemption rule to carry out adverts or communicate financial promotions to clients.

The Proposed Routes for Crypto Advertisement 

According to the FCA, crypto asset promotions will be done through these four routes once the advertising guidelines are implemented.

  • An FCA-authorized personnel communicates the advertisement.
  • The promotion is made by an unauthorized individual but approved by FCA-authorized personnel.

Under this route, legislation is being deliberated on in Parliament that, if passed, would allow authorized firms to approve financial promotions for unauthorized persons.

  • A crypto asset business registered with the FCA under the MLRs communicates the crypto promotion.
  • The crypto asset advertisement is exempted from the Financial Promotions Order.

The FCA adds that “a firm only authorized under the Electronic Money Regulations or the Payment Services Regulations” is not considered an authorized individual. As such, it cannot approve or communicate financial promotions.

FCA’s Penalties for Breaching 

Crypto asset companies that fail to comply with the routes for promotions and advertisements will be penalized.

They will breach “section 21 of the Financial Services and Markets Act 2000 (FSMA), which is a criminal offense punishable by up to 2 years imprisonment.”

The FCA also added that it would take measures where crypto firms promoting crypto assets to UK consumers are in breach of the requirements of the financial promotions rules.  

Disciplinary measures include taking down non-conforming websites, issuing public warnings, and enforcement action.

Tags: BusinesscryptoCrypto FirCrypto FirmsFCAUK
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