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On 18 January 2022, HM Treasury confirmed that it will bring certain cryptoassets into the scope of the financial promotion regime. The Treasury’s view is that the evidence of risks to consumers provides a strong case for intervention, and as such it intends to expand the scope of the Financial Promotions Order (FPO) to include cryptoassets. The Treasury’s announcement was followed the next day by the launch of an FCA consultation on strengthening the financial promotion rules for high-risk investments, including cryptoassets.
These proposals also complement broader work by the Treasury to improve the financial promotion regime, including the proposed new regulatory gateway (“s21 Gateway“) for authorised firms who approve the financial promotions of unauthorised firms (“s21 Approvers“) and the consultation on reforms to the FPO exemptions for high net worth and sophisticated investors. The expansion of the FPO regime to include cryptoassets also sits within the Treasury’s wider work on bringing cryptoassets within the regulatory perimeter, including its consultation on a regulatory regime for stablecoins (for more on those proposals, see our related alert).
The expansion of the FPO regime will introduce added complexity to the current regulatory approach to cryptoassets, with the boundaries of application drawn differently in each regime. Crypto businesses will soon need to navigate different and sometimes conflicting scopes of application with respect to the Treasury’s proposed regulation of certain stablecoin service providers, the AML/CTF regime under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs), and the forthcoming FPO regime and the FCA’s proposed financial promotion rules. For more on this complexity, see A mismatch in scope in the full alert.
In this alert, we consider the scope of the strengthened regime and proposed rules, and what they mean for crypto businesses.
Click here to access the full alert.