New rules by the Financial Conduct Authority (FCA) that ban incentives such as ‘refer a friend’ bonuses on cryptoasset products are set to come into force on 8 October.

The rules are designed to make the marketing of cryptoasset products clearer and more accurate.

As part of the rules, the FCA has stated that marketing by cryptoasset firms must be “clear, fair and not misleading” and products must be labelled with prominent risk warnings and not inappropriately incentivise people to invest.

These rules apply to firms wherever they are based in the world and are designed to strengthen how people are protected from the high risks associated with cryptoassets.

Anyone who continues to promote cryptoassets to UK customers after 8 October, without complying with the rules, could be committing a criminal offence, which could be punishable by an unlimited fine or up to two years imprisonment.

To further support firms in making necessary improvements to their marketing, the FCA has published examples of good and poor practice on firms’ preparations for the new rules.

The FCA has signalled that in response to industry readiness, it will consider giving cryptoasset firms more time to implement certain changes, including a 24-hour cooling off period. These firms could be given until January 2024 to introduce features that require greater technical development, with core rules still set to come into effect from next month.

Firms must apply for the flexibility in order to give themselves time to make the required back-office changes successfully.

Director of consumer investments at the FCA, Lucy Castledine, said: “From this October, crypto firms must market to UK consumers clearly, fairly and honestly. And they must provide risk warnings people understand. As a proportionate regulator, we’re giving firms that apply a little more time to get the other reforms requiring technology and business change right. We'll maintain our close eye on firms during this extended implementation period.

“We are concerned by the failure of many overseas and unregulated crypto firms to engage with us on the new rules. Come 8 October, we will be taking action against firms illegally marketing to UK consumers.”

Head of money and markets at Hargreaves Lansdown, Susannah Streeter, added: “The FCA shot out of the traps, harnessed with new powers and raced ahead with new rules to give consumers extra protection in the crypto Wild West, but it’s now recognised some crypto firms will struggle with the deadline which is fast approaching.

“Crypto firms selling to UK consumers were warned back in February that they would need to get ready for regime change, but as the clock ticks down, the FCA is now willing to give some companies extra time to get their back office to deal with changes which will require more technical tinkering.

“It’s clear the FCA recognises the damage that can be done to overall investor confidence when such high-risk investments are bought by people who seem woefully unaware of the risks. However, it knows it’s also walking a tricky tightrope. It recognises these beefed-up safeguards are needed to ensure consumers are more protected from another crypto implosion, but at the same time it doesn’t want to quash innovation in the digital coin and blockchain space.”

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