The UK’s Financial Conduct Authority (FCA) has issued a stern warning to unregistered overseas cryptoasset firms, indicating that they may face fines and imprisonment for non-compliance with new financial promotion regulations.
In June, the FCA introduced stringent rules governing the marketing of crypto assets by companies, regardless of their global location. All promotional materials must be “clear, fair, and not misleading,” prominently display risk warnings, and avoid inappropriate incentives for investment, such as “refer a friend” bonuses.
In a recent letter to crypto firms marketing to UK customers, labeled as a ‘final warning,’ the FCA expressed concerns about the inadequate response from many unregistered overseas companies. The regulator noted that only 24 out of over 150 firms surveyed responded to their outreach efforts.
Firms that do not engage with the FCA risk infringing upon section 21 of the Financial Services and Markets Act 2000, which could lead to criminal charges punishable by up to two years in prison, unlimited fines, or both. The FCA warned that it would take action against firms promoting illegally to UK consumers, which may include adding them to a Warning List and taking measures to eliminate or block illegal financial promotions across various platforms.
While firms are permitted to communicate with existing UK customers regarding the sale or transfer of their holdings, they must refrain from promoting any new investment activities. The FCA emphasized that such communications would only be appropriate for a limited duration, suggesting that it would be impractical for unregistered cryptoasset firms to maintain long-term relationships with UK consumers without the ability to legally communicate financial promotions.