FCA financial promotions rules will have major impact on crypto, Ocorian says
11 October 2023 UK
Image: Pixels Hunter
Following the launch of the FCA’s new financial promotions regime, regulatory and compliance services provider Ocorian has predicted a considerable increase in cryptoasset regulation.
The Direct Offer Financial Promotion rules, which took effect on 8 October 2023, are designed to improve the accuracy and transparency of cryptoasset product marketing. Risk summaries for restricted mass market investments now include qualifying cryptoassets, and financial promotions must include a risk warning.
Additionally, promotional incentives such as monetary and non-monetary incentives to invest are “strictly prohibited”. Promotions made outside of the outlined rules could result in imprisonment, a fine or both.
Promotion of cryptoassets must now be communicated by or approved by an authorised person, or communicated via an FCA registered cryptoasset firm. Certain promotions are exempt under the Financial Promotion Order.
Qualifying cryptoassets are defined as cryptographically secured, transferable and fungible digital representations of value or contractual rights. Electronic money and controlled investments are exempt from the classification.
Abdul Motobbir, senior compliance consultant at Ocorian, says: "This will reshape the crypto asset landscape. Market participants must be prepared for a wave of stringent requirements; ignoring these changes is not an option. Immediately after the introduction of the new [rules], on 9 October, the FCA issued 146 alerts about crypto asset promotions. “
Alex Hurt, senior compliance consultant at Ocorian, comments: "It's crucial for investors to understand the risks associated with crypto assets fully. The DOFP rules will require investors to fall into specific categories and demonstrate their understanding of the risks through an appropriateness test before proceeding with crypto asset transactions.
“Personalised risk warnings, the 24-hour cooling-off period, risk summary pop-ups, client categorisation, and appropriateness assessments will all be prerequisites for engaging with crypto assets."
The Direct Offer Financial Promotion rules, which took effect on 8 October 2023, are designed to improve the accuracy and transparency of cryptoasset product marketing. Risk summaries for restricted mass market investments now include qualifying cryptoassets, and financial promotions must include a risk warning.
Additionally, promotional incentives such as monetary and non-monetary incentives to invest are “strictly prohibited”. Promotions made outside of the outlined rules could result in imprisonment, a fine or both.
Promotion of cryptoassets must now be communicated by or approved by an authorised person, or communicated via an FCA registered cryptoasset firm. Certain promotions are exempt under the Financial Promotion Order.
Qualifying cryptoassets are defined as cryptographically secured, transferable and fungible digital representations of value or contractual rights. Electronic money and controlled investments are exempt from the classification.
Abdul Motobbir, senior compliance consultant at Ocorian, says: "This will reshape the crypto asset landscape. Market participants must be prepared for a wave of stringent requirements; ignoring these changes is not an option. Immediately after the introduction of the new [rules], on 9 October, the FCA issued 146 alerts about crypto asset promotions. “
Alex Hurt, senior compliance consultant at Ocorian, comments: "It's crucial for investors to understand the risks associated with crypto assets fully. The DOFP rules will require investors to fall into specific categories and demonstrate their understanding of the risks through an appropriateness test before proceeding with crypto asset transactions.
“Personalised risk warnings, the 24-hour cooling-off period, risk summary pop-ups, client categorisation, and appropriateness assessments will all be prerequisites for engaging with crypto assets."
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