According to the FCA’s proposed financial promotions regime, crypto firms could be subjected to some harsh penalties.
The United Kingdom’s financial watchdog, new proposed advertising rules in the United Kingdom could subject executives of crypto firms to up to two years in prison for failing to meet certain promotion requirements.
The U.K. Financial Conduct Authority revealed in a Feb. 6 statement that if Parliament approves the proposed “financial promotions regime,” all crypto firms in the country and abroad will be required to follow certain requirements when advertising their crypto services to U.K. customers.
“Cryptoasset businesses marketing to UK consumers, including firms based overseas, must get ready for this regime,” said the FCA. “Acting now will help ensure they can continue to legally promote to U.K. consumers. As part of their preparations, firms should take all necessary advice, the advisory noted.
A crypto firm advertising its services would have to obtain FCA approval or take advantage of an exemption under the Financial Promotion Order to advertise its services under the FCA’s proposed regime.
There are only four ways in which a crypto-asset business may promote its services in the United Kingdom, according to the regulator:
- A person authorized by the FCA communicates the promotion.
- The promotion is made by an unauthorized individual but approved by an FCA-authorized individual. Legislation is currently being debated in Parliament that, if passed, would establish a regulatory gateway through which authorized firms would be required to pass in order to approve financial promotions for unauthorized persons.
- A crypto asset business registered with the FCA under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 communicates the promotion.
- The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.
Any promotion made outside of these channels, according to the regulator, will be in violation of the Financial Services and Markets Act of 2000 (FSMA), which carries a criminal penalty of up to two years in prison.
Aside from potential prison time for its executives, companies caught violating the new regime may face the removal of their website, public warnings, and other enforcement actions.
At this time, the FCA has stated that they will wait for “relevant legislation” before publishing “our final rules for crypto asset promotions,” implying that the financial promotions regime may be updated or changed.