HM Treasury Drafts Legislation to Expand Financial Promotion Restriction to Cryptoassets

On 27 March 2023, HM Treasury published a draft of The Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023, aiming to expand the scope of financial promotion restrictions to include certain cryptoassets. This move demonstrates a commitment to improve consumer understanding of cryptoasset risks and hold promotions to the same standards as other financial services.

Key Points of the Draft Statutory Instrument:

The draft statutory instrument (SI) introduces several key changes:

1. Creation of a new controlled investment – "qualifying cryptoasset" – by amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO).
2. Modification of existing FPO exemptions for qualifying cryptoassets and the introduction of a temporary, limited exemption for non-authorised cryptoasset businesses registered with the FCA.
3. Implementation of a four-month period, starting the day after the SI is made, for the industry to understand and comply with the new regime.

Reduced Implementation Period

Originally, the government planned a six-month implementation period. However, due to recent market turmoil and growing consumer risks associated with cryptoassets, the period was reduced to four months.

FCA Perimeter Guidance

HM Treasury will not issue further guidance on the SI. Instead, the FCA plans to amend its perimeter guidance for authorised and registered firms.

The Keeling Schedule

To assist in interpreting the SI, a Keeling schedule has also been published.

What next?

The expansion of financial promotion restrictions to include cryptoassets marks an important step in regulating the rapidly evolving crypto industry. This legislation aims to ensure that consumers are better informed about the risks associated with cryptoasset investments and that promotional activities adhere to the same standards as those in the broader financial services sector.

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