Newly proposed advertising rules in the United Kingdom could potentially see executives of crypto firms face up to two years of prison for failing to meet certain requirements around promotion, according to the United Kingdom's financial watchdog.
In a Feb. 6 statement, the U.K. Financial Conduct Authority revealed that if the proposed “financial promotions regime” is approved by Parliament, all crypto firms in the country and overseas would have 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. We encourage firms to take all necessary advice as part of their preparations,” it added.
Under the FCA’s proposed regime, crypto firms would need to either have authorization from the FCA to advertise their services or have an exemption under the Financial Promotion Order.
According to the regulator, there are only four routes under which a “cryptoasset business” can promote its services to customers in the United Kingdom:
- The promotion is communicated by an FCA-authorised person.
- The promotion is made by an unauthorized person but approved by an FCA-authorized person. Legislation is currently making its way through Parliament that, if passed, would introduce a regulatory gateway that authorized firms will need to pass through in order to approve financial promotions for unauthorized persons.
- The promotion is communicated by a crypto asset business registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
- The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.
The regulator said that any promotion made outside of these routes will be in breach of the Financial Services and Markets Act 2000 (FSMA), which carries a criminal punishment of up to two years of imprisonment.
"We will take robust action where we see firms promoting cryptoassets to UK consumers in breach of the requirements of the financial promotions regime," the FCA said.
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Other than potential prison time for its execs, firms caught violating the new regime could face having their website taken down, public warnings and other enforcement actions.
At this stage, the FCA has said they will await the “relevant legislation” to publish “our final rules for crypto asset promotions,” possibly indicating the financial promotions regime could see updates or changes.
"Subject to any changes in circumstances, we expect to take a consistent approach to crypto assets to that taken in our new rules, in place from Feb. 1 2023, for other high-risk investments," the FCA said.