Crypto advertising in the UK - new regulatory regime incoming

On 1 February HM Treasury published a consultation and call for evidence on its proposals for a financial services regulatory regime for cryptoassets. This follows a previous consultation and a commitment to legislate to bring cryptoassets within the FCA’s remit, and has been informed by recent market events including the failure of FTX.   

Key elements of the regime include proposals to:

• expand the FCA’s remit to regulate the financial promotion of certain cryptoassets (though, notably, NFTs will not be captured under the proposed regime, since they can represent a wide array of assets which constitute non-financial services products);
• establish an issuance and disclosure regime; and
• adopt a crypto market abuse regime.

The consultation also acknowledges the environmental impact of consensus mechanisms (due, largely, to the energy usage of the computing tasks) and calls for views on the information that should be provided to consumers in this regard and appropriate metrics for sustainability reporting.

The consultation is open until 30 April 2023 and implementation is expected in late 2023 or early 2024. The FCA has stated: “All crypotasset firms marketing to UK consumers, including firms based overseas, will soon need to comply with the new UK financial promotions regime. Firms must start preparing now for this regime. We will take robust action against firms breaching these requirements.” 

In the meantime, although cryptoassets are largely unregulated, businesses engaged in the promotion of cryptoassets (including non-crypto businesses considering sponsorships and partnerships with crypto businesses) must remain conscious of the existing advertising regulations. The ASA continues to classify cryptoassets as a “red alert priority issue” with enforcement notices and rulings against misleading crypto ads on a steady rise since 2021.

The ASA’s guidance is clear that ads referencing cryptoassets must “expressly and prominently” state that:

• cryptocurrencies are unregulated in the UK;
• cryptocurrency profits may be subject to Capital Gains Tax; and
• the value of investments is variable and can go down as well as up.

Businesses must take particular care that ads do not create a sense of urgency or fear of missing out, or imply that investments in cryptoassets are low risk or that past performance is indicative of likely future performance of the assets.

Interestingly, the ASA’s role is not mentioned in the current consultation, but we expect that the ASA will continue to retain some level of oversight over cryptoasset advertising (particularly in respect of NFTs) even after implementation of the new regime.