Crypto companies are likely to find it harder and more expensive to get their promotional materials approved in the U.K. if proposals put forward by the country’s financial regulator are accepted.
The Financial Conduct Authority has proposed limiting the number of firms that are able to approve marketing communications by taking away the authority of companies authorized under the Financial Services and Markets Act 2000 and requiring an additional level of authorization to allow the FCA to monitor firms more closely.
The FCA published its proposals in a "consultation" paper as it kicked off a two-month consultation period, during which interested parties can weigh in on the proposals, on Tuesday. The deadline for responses is Feb. 7.
“Historically, we have seen too many noncompliant promotions being approved and then communicated by unauthorized firms to retail consumers,” the FCA stated in the consultation document.
Crypto companies would be hit by any regulatory change resulting from the consultation if the Financial Services and Markets Bill that is now in Parliament becomes law in its current form. Recent amendments to the bill require crypto businesses’ ads to be approved by an FCA-authorized firm, and that could produce a bottleneck.
The number of applications “with sufficient competence and expertise to approve crypto asset financial promotions will be limited at first,” the FCA said. It expects the number to increase over time.
The Treasury is also expected to publish a consultation paper in the coming weeks on how it plans to regulate the crypto industry. That is expected to give the FCA more guidance on how crypto will fit in with its rules about ads.
The FCA is consulting on whether a company that wants to be allowed to approve promotions should be checked for having “adequate systems, controls and processes in place” and whether it is able to maintain the records of the financial promotions it wants to oversee. Among other things, it would have to assess the viability of the financial product being promoted.
The FCA may also require that approving firms report twice a year on their approval activity. They may also have to notify the regulator when they approve, amend or withdraw the approval of a financial promotion within seven days of doing so.
"These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off," Sarah Pritchard, executive director of markets at the FCA, said in a statement.
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