Today the Financial Conduct Authority (FCA) announced a new set of rules for marketing crypto-assets that are expected to come into force on 8 October 2023. They apply to anyone targeting UK investors, including organizations based outside of the UK.
It also published its latest consumer survey that showed 9% of adults of around 4.97 million people own crypto in the UK. However, almost 40% of people own less than £100.
The rules require any promotion to be fair, clear and not misleading. And it must include a risk warning. Incentives such as refer-a-friend bonuses are not allowed. Plus, there is a 24 hour cooling off period for first time investors. However, if it takes 24 hours for the investor to go through know your customer (KYC) procedures, that counts as cooling off.
On sign-up, the crypto firm needs to ask about their client’s income level and net worth to assess the appropriateness of the investment. This will involve retail investors limiting their crypto investment to 10% of their net assets.
Additionally an FCA authorized person must be involved in the promotion in some way, or there needs to be an exemption. Failure to comply is a criminal offence punishable by an unlimited fine or two years in prison.
We don’t doubt the FCA’s good intentions, but we didn’t find a plain English guide saying precisely what crypto companies or incumbents must do when promoting crypto. There’s a 91-page policy document, most of which discusses responses to a previous consultation. It includes enabling legislation that is somewhat hard to follow.
Without all the analysis in the 91-page document, the rules could likely fit into 10-15 pages. Easy-to-follow guidance would encourage compliance. We asked whether such a document exists. This is what they have at the moment.