On 7 September 2023, the Financial Conduct Authority (“FCA”) published a press release announcing its intention to revise the implementation timeline for enforcing specific rules related to the promotions of cryptoassets. These rules were outlined in the financial promotion rules for cryptoassets (PS23/6), which were published on 8 June 2023 (“Crypto Rules”). Additionally, the press release offered further guidance to firms to better prepare for the new Crypto Rules.
Key Points to Note
- Changes to Implementation Timeline:
The Crypto Rules will come into effect on 8 October 2023. Financial institutions providing cryptoassets related services or offering cryptoassets related products will need to observe and comply with the Crypto Rules by this date.
However, the FCA acknowledges that certain rules require additional time for implementation…
Therefore, the FCA is granting crypto asset firms until 8 January 2023 to implement the features that require greater technical development, such as the 24-hour cooling period, client appropriateness testing, and client categorisation features.
- Good and Poor Practice:
On the same date, the FCA released an article that explains both good and bad practices when it comes to complying with the Crypto Rules. Specifically, it outlines what constitutes effective oversight, which typically involves having a person in charge of ensuring that the implementation project is carried out correctly and that the firm continually complies with the rules on an ongoing basis. The article also sets out expectations for what firms should put in place. For instance, they should be prepared for a potential increase in customer inquiries during the onboarding process and have procedures in place for handling client complaints effectively.
The guidance provides detailed instructions on how risk disclosures should be presented. For example, these disclosures should clearly outline the main risks associated with the investment in a way that is easy for consumers to understand and takes approximately 2 minutes to read.
Firms are encouraged to follow other examples of best practices outlined in the guidelines, including conducting appropriateness assessments, utilising elected professional client status, and having contingency plans in case of unexpected events.
The FCA plans to release additional guidance to the industry. These guidelines will offer additional clarity on what firms should do to make sure their promotions of cryptoassets are clear, fair, and not misleading. The FCA has indicated that more extensive work will be done in the future to shape rules and regulations for financial services involving cryptoassets. The FCA also plans to collaborate with international counterparts and the wider industry in these endeavours.
Firms providing crypto-related products and services in the UK should remain vigilant for forthcoming regulatory developments and the guidance provided by the FCA. Cleveland & Co can support firms operating within the crypto sector by offering guidance on upcoming regulatory advancements and conducting reviews of their policies and procedures to ensure compliance.
For more information, and any guidance or advice, Cleveland & Co, your External in-house counsel, are here to help.
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