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FCA releases guidance for compliance with new UK crypto asset promotion rules

November 2, 2023 Coin Telegraph

The regulator has made a few efforts to help crypto firms comply with the rules that came into force on Oct. 8.

Rules for crypto asset promotion that came into force in the United Kingdom on Oct. 8 have led to some confusion, judging from the low level of compliance. The Financial Conduct Authority (FCA) responded with additional guidance for crypto firms to help them fall into line.

The FCA released “finalized non-handbook guidance” to compliance with the rules for crypto firms on Nov. 2. It also provided the regulatory agency’s response to industry feedback. FCA director of consumer investments Lucy Castledine said in a statement:

“While the new rules for firms marketing crypto to UK consumers are aligned with the existing rules for other high-risk investments, we’ve engaged extensively with industry and designed this Guidance to specifically support crypto firms complying.”

The FCA’s supportive attitude toward the crypto industry has been seen in the repeated warnings and reminders it has released since the new rules were published on June 8. It has even extended some technical deadlines through Jan. 8, 2024. In spite of those measures, several market players announced their departure from the U.K. in response to the rules, and compliance has been abysmal since their introduction.

Find out the 3 common issues we've identified with #cryptoasset financial promotions.

Consumers should check the FCA Warning List before making any investment in #crypto https://t.co/CKn4cFxb11
— Financial Conduct Authority (@TheFCA) October 25, 2023

The new 32-page guidance does not create new obligations for crypto firms, but the authors noted that it reflected a new “secondary international competitiveness objective” in addition to addressing its expectations for firms’ domestic behavior.

The guidance section of the text emphasized key segments of the rules and other pertinent legal documents. The second section gives detailed answers to questions submitted during the consultation phase.

The U.K. implemented the Financial Action Task Force’s Travel Rule on Sept. 1. Legislation regulating stablecoins is expected to be introduced into Parliament next year.

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Binance, OKX to comply with new financial promotions rules in UK

October 9, 2023 Coin Telegraph

Crypto firms such as Binance, OKX and MoonPay have announced they've been working to comply with the United Kingdom’s new financial promotion rules.

Major global cryptocurrency exchanges like Binance and OKX have announced that they're working to comply with new financial promotion regulations in the United Kingdom.

The Financial Conduct Authority (FCA) of the U.K. enacted the country’s new Financial Promotions (FinProm) Regime on Oct. 8 for cryptocurrency firms, aiming to ensure fair, clean and transparent crypto promotions.

Binance announced on Oct. 6 that it has launched a new domain for U.K. users and partnered with the local peer-to-peer lending platform Rebuildingsociety.

In line with the compliance update, Binance’s U.K. retail users will be redirected to a localized domain starting from Oct. 8, which will only show Binance products and services that are permitted in compliance with U.K. regulations. Such products will include spot and margin trading, Binance Pay, nonfungible token (NFT) marketplace, loans and others.

However, in compliance with the new FCA rules, Binance will cease to offer products like gift cards, referral bonuses, gift cards, academy and research, the announcement notes.

The changes will only apply to retail users in the U.K. and will not affect users which are exempt under the new FinProm rules, including certain institutional and professional investors.

OKX issued a statement on FinProm compliance on Oct. 6 as well. The exchange said that it has reduced its token offering to around 40 assets and adopted eye-catching risk warnings on its interface. One such warning is located at the topof the OKX’s main page, inviting investors to take a few minutes to learn more about the risks of crypto investment. The warning reads:

“Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.”

Additionally, OKX has launched a dedicated U.K. account on X (formerly Twitter). The firm has promised to mention the products and services that will be in compliance with new U.K. regulations on the social media page.

Crypto payment service MoonPay is another industry firm that has been working to comply with the new FinProm rules. According to MoonPay deputy general counsel Matt Sullivan, one of the biggest challenges of ensuring compliance with the rules is associated with operating a global business.

“The challenge arises in ensuring compliance with all of these new requirements in the UK, while operating across the globe,” Sullivan said in a statement to Cointelegraph, adding:

“Ensuring compliance with the FinProm rules requires localised product updates, implementation of new processes and policies, as well as education across the company. [...] There may be a bit of a ‘settling in’ period and that initial views as to the application of certain rules may evolve over time.”

Some crypto firms have apparently been struggling to comply with the new promotion rules in the United Kingdom. According to official statements issued by the FCA on Oct. 8, major crypto exchanges like KuCoin and HTX (formerly Huobi) might have been promoting their services without permission. The firms were listed among 143 entities described as “non-authorized firms” that are not allowed to operate in the United Kingdom.

A total of 143 new entities were added to the warning list, including major exchanges, such as Huobi-owned HTX and KuCoin. The warning list doesn’t reveal much apart from the statement, “You should avoid dealing with this firm.”

UK FCA gives unregistered crypto firms ‘final warning’ on ads regime compliance

September 21, 2023 Coin Telegraph

The financial regulator expressed its frustration at the lack of engagement from crypto firms in a strongly worded letter.

The Financial Conduct Authority (FCA), the United Kingdom’s financial markets regulator, has again expressed its concern over the lack of engagement on the part of crypto firms that will soon be subject to new marketing rules. The consequences of noncompliance could be severe, it warned.

In a letter dated Sept. 21, the FCA said it was making a final warning to firms marketing crypto assets to UK consumers. The four-page letter first documented the efforts the agency had made to reach out to crypto firms and attempted to support them as they complied with rules announced June 8.

The FCA has gone so far as to extend the Oct. 8 compliance deadline to Jan. 8, 2024, “to introduce features that require greater technical development,” and to publish lengthy notes on best practices. But “many unregistered, overseas cryptoasset firms […] have refused to engage with the FCA despite our best efforts,” the letter said. As evidence, the letter pointed out that only 24 such firms responded to a survey sent to 150 of them.

Compliance with the new regime will require firms to be proactive:

“Once the regime is in force, unauthorised and unregistered crypto businesses will only be able to communicate financial promotions which have been approved by an authorised person or are within the scope of certain narrow exemptions in the Financial Promotion Order.”

Illegal promotion of crypto assets would become a criminal offense. Violators would be placed on a warning list and their promotions could be blocked or removed from websites, social media and apps. Those intermediaries would be expected to heed the new regime as well, in line with Anti-Money Laundering and Counter-Terrorist Financing regulations and other measures.

FCA issues final warning to unregistered crypto firms about upcoming financial promotions regime. UK customer concerns cited. Compliance steps outlined. Expectations for supporting businesses discussed. Read the letter in full here: https://t.co/AjSTQKXDDl pic.twitter.com/hfX9qbLmBq
— Digital Currencies Governance Group (DCGG) (@DigitalDcgg) September 21, 2023

The FCA could seek monetary compensation from the violators, and contracts they enter into with UK citizens would not be enforceable, the letter continues. Crypto asset forms that are unable to meet the new requirements are expected to take steps to prevent UK consumers from responding to their promotions.

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SEC charges crypto investment manager with misleading advertising, custody claims

August 21, 2023 Coin Telegraph

The case against Titan Global Capital Management is the first brought under the U.S. regulator’s 2020 revised marketing rule. It also touches on compliance issues.

Fintech investment adviser Titan Global Capital Management has agreed to a cease-and-desist order by the United States Securities and Exchange Commission (SEC), along with censure and penalties after the agency pressed charges against it relating to advertising and compliance failures.

According to the SEC, the New York-based firm made misleading claims on its website that were based on “hypothetical performance” in violation of the SEC’s amended marketing rule of December 2020. This was the first case of charges made under that rule. SEC senior enforcement officer Osman Nawaz said in a statement:

“The Commission amended the marketing rule to allow for the use of hypothetical performance metrics but only if advisers comply with requirements reasonably designed to prevent fraud. […] This action serves as a warning for all advisers to ensure compliance.”

Titan claimed “annualized” performance, based on three weeks of data, could lead to returns of up to 2,700% on its Titan Crypto product, which debuted in August 2021. The SEC further found that the firm also made unclear statements about crypto asset custody and other policies and failed to adopt appropriate policies on employee trading in the period leading up to October 2022.

Titan is registered by the SEC and a member of the Financial Industry Regulatory Authority self-regulatory organization. The firm self-reported some of the issues and cooperated with the investigation before agreeing to the SEC order, without admitting or denying the SEC findings. The SEC action als included $192,454 in disgorgement of ill-gotten gains with interest and a fine of $850,000 that will be distributed to affected customers.

1/ SEC's case against Titan suggests continued enforcement focus on ALL crypto market participants, including those that have affirmatively registered with and are regulated by the SEC.https://t.co/fOtWcDpmll
— Justin Browder (@jlb410) August 21, 2023

The SEC has made tightened enforcement for crypto investment advisers a regulatory goal. It announced the new focus in a February announcement from the Division of Examinations. It has also proposed changes to custody rules that could negatively impact cryptocurrency firms.

Titan did not respond to a Cointelegraph request for comment by the time of publication.

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Crypto ads face stricter rules, referral bonus ban by UK FCA

June 8, 2023 Coin Telegraph

Crypto services in the U.K. will face stricter regulations, including a “cooling-off period” for first-time investors and a ban on “refer a friend” bonuses.

In a June 8 announcement, the United Kingdom’s Financial Conduct Authority (FCA) said that from Oct. 8, advertisers of crypto services in the U.K. would be subjected to stricter regulations.

The watchdog has mandated that crypto companies in the U.K. implement a “cooling-off period” for first-time investors. Additionally, as part of measures to enhance investor awareness of risks, the FCA has prohibited using “refer a friend” bonuses by firms in the sector.

Sheldon Mills, executive director of consumers and competition at the FCA, said in the written statement that while the decision to purchase crypto lies with individuals, research indicates that many express regret over impulsive choices. The rules aim to give people sufficient time and appropriate risk warnings to enable an informed decision-making process.

In the statement, Mills added:

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”

Under the new regulations, crypto companies are obligated to verify that individuals possess the necessary knowledge and experience to engage in crypto investments. Furthermore, those promoting cryptocurrencies must provide transparent risk warnings and ensure their advertisements are fair, clear and devoid of any misleading information.

The nerules from the FCA align with government legislation aimed at subjecting crypto promotions to regulatory oversight.

Against the backdrop of an intense regulatory crackdown in the United States, marked by the U.S. Securities and Exchange Commission (SEC) filing lawsuits against Binance and Coinbase, the recent development underscores ongoing scrutiny faced by the crypto industry.

In August 2022, the FCA implemented more stringent regulations to address deceptive advertisements concerning high-risk investment products. However, these measures did not include cryptocurrencies, as the regulator was awaiting government confirmation to extend its oversight to crypto products.

In its recent announcement, the FCA stated that the actions taken to address crypto advertisements align with the restrictions implemented last year for promoting high-risk investments. The FCA is also seeking feedback on additional guidelines outlining obligations for crypto advertisers. Interested parties have until Aug. 10 to give their input during the consultation process.

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Belgian FSMA surveys crypto investors before taking on new ad regulation authority

March 20, 2023 Coin Telegraph

Crypto ads in Belgium will bear a blunt warning after a new regulation takes effect in May, and “mass” advertising campaigns will be subject to advance FSMA approval.

The Belgian Financial Services and Markets Authority (FSMA) will have new powers to supervise virtual currency advertising when a new regulation comes into force on May 17. In preparation for its new role, the agency commissioned a survey of investors.

The new regulation will have three aspects. First, it will require accuracy and clear language, with no statements on future returns of value. Second, there will be a mandatory warning on all advertising:

“Virtual currencies, real risks. The only guarantee in crypto is risk.”

In addition, a “broader warning should sum up the various risks in greater detail.”

Finally, campaigns with a target audience of 25,000 or more (mass campaigns) will have to be submitted to the FSMA at least ten days in advance “to enable the FSMA to intervene, if necessary, before the campaign actually begins.”

FSMA Introduces Rules, Launches Educational Video and Game Module to Protect Consumers Investing in Virtual Currencies

Full news: https://t.co/DrJGYVxUhU pic.twitter.com/IWAIdT6oQG
— Regxplora (by Regxelerator) (@regxplora) March 20, 2023

The FSMA will also boost educational efforts through its Wikifin financial education center. In preparation for its new role, the FSMA commissioned a survey of 1,000 Belgian investors in November 2022 who placed money in investment products beyond savings, term deposit and pension accounts.

Over a third (34%) of investors surveyed in the age group 16-29 bought virtual currencies, with the proportion falling to 11% for the 50-59 age group. Men make up 80% of the buyers. Investors were concentrated in Flanders (63%), with only 22% living in Wallonia and 15% in Brussels.

Crypto investments tended to be smaller than traditional ones, with only 15% of investors holding more than 10,000 euros’ worth of crypto and 31% holding less than 500 euros worth. Crypto investors were more dependent on the advice of friends, family, apps and “robo-advice” than traditional investors.

The FSMA began regulating cryptocurrency exchanges in May 2022. The United Kingdom has also imposed tightened requirements for crypto advertising recently.

Crypto ads and sponsors banned from women’s cricket league in India

February 14, 2023 Coin Telegraph

Following men's cricket, the Board of Control for Cricket in India (BCCI) prohibits the women's teams from having commercial associations and other sponsorships with crypto businesses.

Indian authorities once again demonstrated their tough stance on cryptocurrencies with a preemptive ban on crypto advertising and sponsorships in the local women’s cricket league.

As reported by Planet Sport on Feb. 14, the Board of Control for Cricket in India (BCCI) sent a 68-page advisory to the Women's Premier League teams, specifying the activities which couldn’t be advertised. In the document, cryptocurrencies were mentioned among the gambling and tobacco industries:

“No franchisee shall undertake a partnership or any kind of association with an entity that is in any way connected/related to an entity that is involved/operates, directly or indirectly, in the cryptocurrency sector."

The ban follows a previous prohibition for the men’s cricket Premier League, introduced back in 2022. Before the prohibition, Indian Premier League had collaborated at least with two local crypto exchanges — CoinSwitch Kuber and CoinDCX. Coincidentally, in March 2022, the crypto businesses decided not to advertise in the Premier League out of responsibility concerns.

Home to an estimated 115 million cryptocurrency investors, in 2022, India introduced two laws demanding crippling taxes on crypto-related unrealized gains and transactions and requiring its citizens to pay a 30% tax on unrealized crypto gains.

Some of the investors expected a change this year to ease the pressure on the crypto sector, but the national budget for 2023 didn’t deliver them. The country’s finance minister, Nirmala Sitharaman, believes in a global regulatory framework on crypto, which is why we probably won’t see any dramatic shifts in the Indian regime, initiated in an autonomous manner.

Crypto advertising became a hot topic for global regulators and enforcement agencies amid the series of failures and bankruptcies of large platforms. In the United Kingdom, newly proposed advertising rules could potentially see executives of crypto firms face up to two years of prison for failing to meet certain requirements around promotion.

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