FCA: Crypto Firms Face „Significant Challenges” Ahead of Financial Promotions Regime

FCA: Crypto Firms Face „Significant Challenges” Ahead of Financial Promotions Regime

As the clock ticks toward the implementation of the
crypto asset financial promotions regime on October 8, 2023, the UK’s Financial
Conduct Authority (FCA) has engaged in a diverse range of regulated crypto asset
firms to assess their readiness.

According to the
watchdog, some firms have overlooked the broad aspect of financial promotions,
focusing primarily on traditional advertising and neglecting the content of
their digital promotions. According to the
FCA, the definition of
financial promotion is broad, encompassing websites, blogs, mobile apps, and
various forms of content.

FCA Defines Financial Promotions Regime

The FCA has observed
that compliance with the regime’s territorial scope for firms operating
globally can be a complex challenge. In light of this, the best-prepared firms
have established clear controls, implementing geo-blocking and KYC/AML measures
to prevent consumers in the UK from accessing promotions intended for other markets.

„The use of social
media to promote financial services, including crypto assets, presents some
particular issues and challenges,” the FCA stated. „In July 2023, we
issued GC23/2 consulting on updated guidance on financial promotions on social
media. We recommend that all crypto asset firms intending to promote to consumers in the UK consider this proposed guidance.”

Additionally, the
regulator has found out that some firms aim to boost brand awareness through
sports sponsorship deals, like partnerships with UK-based companies. In light
of this, the FCA has warned that companies should be cautious as any financial
promotion rules apply to brand advertising beyond specific categories.

Crypto Asset Firms Plan
for Implementation

The UK’s financial
sector authority has emphasized the need for clear accountability among
crypto asset firms ahead of the new regime. It stated that the
best-prepared firms have designated senior individuals, like CEOs or COOs, with
overall responsibility for compliance. In contrast, the least prepared firms
have distributed responsibility among multiple individuals, leading to
confusion.

Creating precise formats
for risk warnings remains a work in progress for many firms. Compliance with
prominence requirements, such as the positioning of risk warnings and font size
selections, is important according to the FCA. Prepared firms have examples of
how risk warnings will be presented, ensuring a customer-friendly approach.

Meanwhile, Finance
Magnates reported about
three weeks ago that the FCA had set clear expectations for crypto businesses
operating in the UK regarding compliance with the Travel
Rule. Starting from
September 1, 2023, crypto enterprises in the country are required to adhere to the
Travel Rule, which mandates the collection, verification, and sharing of
important information related to the transfer of crypto assets.

This article was written by Jared Kirui at www.financemagnates.com.

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