The UK Government has legislated to bring certain cryptoassets within scope of the financial promotion regime via the Cryptoasset Financial Promotion Amendment Order 2023, which amends the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the FPO).
The definition of a financial promotion is very broad and applies to a wide range of communications made by a firm including its website, mobile apps, social media posts and online advertising. All firms marketing cryptoassets to UK consumers, including firms based overseas, must comply with this regime. The regime came into force on 8 October 2023 – all unauthorised and unregistered crypto businesses will only be able to communicate financial promotions which have been approved by an authorised person or are within the scope of certain narrow exemptions in the FPO. All cryptoasset firms targeting UK consumers, including those based overseas, must now align with the UK’s financial promotions regime.
The UK Government has announced ambitious plans to regulate wider cryptoasset activities in 2024, which once in place ought to better protect both investors and businesses.
This year, we can expect to see the following being introduced:
- Strengthening rules for crypto trading platforms, which will involve crypto trading venues defining the content requirements for admission and disclosure.
- The Government plans to introduce a world-first regime strengthening rules around the lending of cryptoassets.
- The proposals will also strengthen the rules around financial intermediaries and custodians, which have responsibility for facilitating transactions and safely storing customer assets.
- The Government also intends on improving market integrity and consumer protection by setting out a proposed crypto market abuse regime.
These steps aim to deliver a robust regulatory framework, enhancing consumer protection and reducing fraud in this sector. The Government’s plans are optimistic but are in line with those regulations being introduced in Europe and the US, with a greater burden being placed on the FCA and the introduction of the National Fraud Intelligence Bureau (replacing Action Fraud). City of London Police has appointed two new suppliers to provide the fraud and cybercrime reporting service which will replace Action Fraud. Capita PLC has been appointed to operate the contact centre on behalf of the City of London Police and provide the technology to enable reporting, such as a new website and reporting tool. PwC UK will provide the technology services for the crime and intelligence management that underpins the National Fraud Intelligence Bureau (NFIB). PwC UK will also support the City of London Police integrate and manage the services. The new service with both suppliers will become operational in Q2 2024.
The future of crypto
The future of cryptocurrency in 2024 is yet to be defined, but the sector must remain vigilant in addressing issues around artificial intelligence, the scope of fraud currently operating within the market, and the regulatory compliance issues which will increase considerably. The evolution of digital assets will continue on an upward trend, and with the possible introduction of Central Bank Digital Currencies still on the horizon, there is a growing acceptance in the rise of digital assets. However, as the crypto industry continues to grow and develop, so does the sophistication and risk of the fraud we are seeing.
The decentralised finance space continues to mature and develop. With the introduction of new regulation, and a push from the government back towards centralisation, we are likely to see new spaces and opportunities. As decentralised finance (DeFi) becomes more accessible, traditional financial institutions are going to need to adapt their financial policies to keep up with the market.
2024 is likely to see a more joined-up crypto sector, offering more security and more opportunities for investment. Digital assets, in one shape or another, are here to stay, and anyone looking to invest in this space must take great care.
If you have been a victim of crypto fraud, please contact Louise Abbott.
This article was co-authored by Andrew Maguire of Littleton Chambers.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.