Thursday, September 21, 2023

Cryptocurrency companies could face up to two years in prison for breaching UK advertising laws


According to the UK’s financial watchdog, the UK’s newly proposed advertising rules could potentially face crypto company executives facing up to two years in prison for failing to meet certain requirements about promotion.

in feb. In its sixth statement, the UK’s Financial Conduct Authority revealed that if the proposed “System of Financial Promotions” is approved by Parliament, all crypto firms in the country and abroad will have to follow certain requirements when advertising crypto services to UK clients.

“Marketing crypto assets to UK consumers, including overseas businesses, should prepare for this regime,” the FCA said.

“Acting now will help ensure they can continue to legally promote to UK consumers. We encourage businesses to take all necessary advice as part of their preparations.”

Under the proposed FCA regime, crypto companies would either need to obtain permission from the FCA to advertise their services or obtain exemption under the Financial Promotion Order.

According to the regulator, there are only four ways in which a “crypto asset firm” can promote its services to clients in the UK:

  1. The promotion is sent by a person authorized by the Financial Conduct Authority (FCA).
  2. The promotion is being conducted by an unauthorized person but has been approved by an authorized person of the Financial Conduct Authority (FCA). Legislation is currently working its way through Parliament which, if passed, would usher in a regulatory portal that authorized firms would need to pass through in order to approve financial promotions for unauthorized persons.
  3. The promotion is being offered by a crypto asset company registered with the FCA under the Money Laundering, Terrorist Financing and Money Transfer (Information of Payer) Regulations 2017.
  4. Otherwise, the promotion complies with the exemption conditions in the Money Promotion Order.

The regulator said any promotion outside of these methods would be in breach of the Financial Services and Markets Act 2000 (FSMA), which carries a penalty of up to two years in prison.

“We will take firm action where we see companies promoting crypto-asset pools to UK consumers in breach of the requirements of the Financial Promotions Scheme,” the FCA said.

Related: UK authorities are divided over banning the sale of crypto investment products

Other than potential jail time for their executives, companies caught violating the new system could face removal of their website, public warnings and other enforcement action.

At this point, the FCA said it would wait for “relevant legislation” to publish “our final rules for promoting crypto assets,” which may indicate updates or changes to the system of financial promotions.

“Subject to any changes in circumstances, we expect a consistent approach to crypto assets to those taken in our new rules, effective from February 1, 2023, for other high-risk investments,” the FCA said.