Key Insights
- FCA review of crypto firms’ compliance with financial promotion rules finds both good practices and significant shortcomings.
- Regulator warns of potential action against non-compliant firms and emphasizes the need for improvement across the sector.
- FCA provides guidance and resources to help crypto firms meet regulatory standards, urging direct engagement to raise industry-wide compliance.
LONDON, Aug 7 (Reuters) – The UK’s Financial Conduct Authority (FCA) has released findings from its recent review of crypto firms’ compliance with financial promotion rules, revealing a mixed landscape of adherence to regulations designed to protect consumers.
The review, which focused on rules introduced in October 2023, examined how firms implemented personalised risk warnings, 24-hour cooling off periods, client categorisation, and appropriateness assessments.
While acknowledging the challenges firms face in adapting to new regulations, the FCA found instances of both good practice and significant shortcomings across the sector.
“We’ve seen examples of firms demonstrating good practice, which we’ve shared to help others meet their obligations,” said a senior FCA official, speaking on condition of anonymity. “However, we also uncovered multiple instances where firms fell short of required standards.”
The regulator has been working closely with individual firms to address concerns and improve compliance. Despite these efforts, the FCA emphasized that more work is needed across the sector.
In a stern warning to the industry, the FCA stated, “If firms do not improve, we will act.” The regulator also indicated that compliance with these rules would be considered in future authorization applications under the upcoming financial services regulatory regime for cryptoassets.
The FCA urged firms to refer to its good and poor practice guide and previously published guidance, cautioning against relying on industry comparisons given the prevalent poor practices in the market.
“We expect firms to engage directly with us to drive up standards across the sector,” the FCA official added.
The regulator reiterated the importance of strong systems and controls for compliance, particularly for firms communicating or approving financial promotions.
In an effort to support the industry, the FCA highlighted available resources for firms, including:
- Previously published good and poor practice examples covering the full cryptoassets financial promotions regime
- Information on services falling within the scope of money laundering regulations (MLRs)
- Support for prospective applicants, including pre-application meetings
- Published information on regulatory standards for anti-money laundering and terrorist financing controls
- A crypto web hub with details on the application process and common registration questions
Industry experts suggest that firms operating in the UK crypto market should take immediate steps to review and enhance their compliance practices in light of these findings.