UK’s FCA provides more guidance on crypto promotion compliance

The Financial Conduct Authority (FCA), the United Kingdom’s financial regulator, has released another round of guidance for crypto firms that advertise crypto services. The FCA introduced regulations on cryptocurrency promotion in October 2023 and has been helping the industry comply with them ever since.

The regulator examined how companies were implementing the requirements for promoting crypto services. It selected companies subject to the requirements, requested information from them and visited them.

FCA looks at companies, assesses their practices

The FCA wanted to know how companies were doing with the 24-hour cooling-off period, personalized risk warnings, client categorization, assessing the appropriateness of the investment, recordkeeping and due diligence of crypto assets. They divided their findings into good and poor practices.

The majority of the advice given on the topics was straightforward. A good practice regarding the cooling-off period, for example, was:

“Giving clear information that there is a cooling-off period, and explaining that it is there to ensure consumers take the time to consider if the product is right for them.”

A few of the tips were more substantial. “For some firms due diligence seemed unduly focused on whether the cryptoasset amounted to a security in certain jurisdictions, rather than being tailored to UK regulatory requirements,” the assessment stated. Similarly:

“We have seen firms relying on industry comparisons to benchmark what is acceptable. Given the levels of poor practice in the market, firms should not be doing this.”

“Instead, we expect firms to engage with us directly to drive up standards across the sector,” the assessment continued.

The long path to compliance

The FCA announced in June 2023 that new rules would be introduced in October of that year. They were to replace rules set up in August 2022. The FCA saw in advance that there would not be complete compliance by October and gave some companies until Jan. 8, 2024, to come into compliance.

Hardly more than two weeks after the promotional rules came into effect, the FCA had found over 200 breaches of rules, it said. Even Binance had compliance issues after its banking partner had restrictions placed on it.

The FCA released additional rules in November to help crypto companies find their way to compliance.