Crypto firms operating in the UK are bracing themselves for the country’s stringent new advertising regulations. In order to comply, some firms have made the decision to cut off their services to UK customers. These regulations allow registered virtual asset service providers, who are authorized by the Financial Conduct Authority (FCA), to self-authorize their promotions. However, unregistered firms like Luno, ByBit, and PayPal have decided to halt their services to UK clients ahead of the effective date of October 8th.
The FCA introduced new rules on crypto promotions after consulting on the matter over a year ago. However, the guidance was only released a few months ago, leaving some firms feeling that they were given too little time to implement the necessary changes. Su Carpenter, director of operations at lobby group CryptoUK, commented that many firms are nervous about their interpretation of the guidance and will take a cautious approach to future financial promotions.
Compliance with the new regulations requires crypto firms to make significant changes to their online platforms. The FCA has allowed firms to apply for a three-month extension to meet these requirements due to the challenges involved in implementing the necessary system builds and operational changes.
However, the FCA has expressed concerns that some international firms are not interested in complying with the new regime. Any activity that can be seen as an invitation or inducement to invest, including offering cash or goods, will be considered a financial promotion under the FCA rules. Asim Arshad, a senior associate at law firm Lawrence Stephens, emphasizes that all communications to UK consumers relating to crypto assets must comply with the new rules.
Firms that operate primarily online will need to make changes to their websites. These include implementing a 24-hour cooling period for first-time buyers, which requires users to re-confirm their intentions to receive investment invitations after at least one day. Firms have also struggled to develop measures to assess the appropriateness of specific products for clients. Moonpay, for example, has been working to make the necessary platform changes to ensure compliance with the guidelines.
While some firms have decided to cease operations in response to the new regulations, registered firms like Bitstamp, Bitpanda, Kraken, and Zumo have confirmed that they will not be halting their services. A spokesperson from Bitpanda stated that they are preparing for the new regime and have no plans to suspend services to UK customers at this time.
Unregistered firms must halt their communications relating to crypto services in order to comply with the regulations. Bybit and Luno have already announced their withdrawal from the UK market, with Bybit suspending operations and Luno preventing certain UK clients from investing in crypto.
The FCA has expressed that it is pleased to see firms making decisions to meet the required standards. However, officials have also expressed concern about the lack of engagement from some unregulated overseas firms. Diego Ballon Ossio, a partner at Clifford Chance law firm, explains that it will become increasingly difficult for unregistered firms to find loopholes to avoid compliance, as the FCA is closing down these options. Overseas firms can either register with the FCA to self-authorize their promotions or seek authorization from an authorized company.
In December 2022, the FCA plans to introduce additional requirements for firms that approve others’ advertisements, such as the continuous monitoring of promotions. Ballon Ossio predicts that this may make it challenging to find an authorized company willing to take on the liability and meet all the criteria.
