Knowledge Hub
It’s been a busy few weeks for the digital assets sector.
On 8 October, the Financial Conduct Authority (FCA) implemented its new cryptoassets financial promotions regime. The aim is to ensure that firms operating in the UK now take a much more holistic approach to considering how their services are promoted to the country’s consumers.
Any firm active in our sector must now consider, at each stage in their product’s lifecycle, how they can promote to customers in a way that’s fair, clear and not misleading.
The impact has been immediate, with the FCA emphasising its intentions by issuing 146 alerts in the first 24 hours of the new crypto marketing regime. And over the past month or so, a host of big names, including Luno and PayPal, have paused their UK operations whilst they attempt to meet the new requirements.
A pioneering approach
Zumo was one of the first digital asset platforms to integrate the tech based requirements of the FCA’s new regime. Our early compliance demonstrated not just our technical and ethical rigour but our commitment to leading the industry in transparency, innovation and consumer protection.
We’re fully committed to working with our partners to help them provide a compliant environment in which they can continue their digital asset journey.
Talking to market participants at recent events, it struck me there is still a lot of confusion about what the financial promotions regime actually encompasses.
And so as part of our ongoing efforts to help educate and inform the sector, I recently had the pleasure of hosting an episode of The Zumo Podcast, which explored the immediate aftermath of the financial promotions regime, its consequences, and what we can expect to come next.
I was joined by Erica Stanford, author of ‘Crypto Wars’ and Fintech Specialist at the law firm CMS, and Michael Johnson, Zumo’s Head of Compliance, who has been instrumental in helping us to comply with the new regime.
Curbing false promises
It was a fascinating discussion.
Erica highlighted that “crypto is being crypto”, with many companies simply not wanting to follow all the rules. She also explained that the regime goes far beyond marketing channels – it’s about curbing false promises and relates to any wording, used anywhere, to describe a product.
Erica and Michael agreed the new regime is welcome, pointing to previous examples of companies promising impossible returns and undermining confidence in our burgeoning sector. Michael talked about how the regime is probably the most effective move at this point in time – because it doesn’t take much to slip from promoting a brand into making a misleading financial promotion, whether intentional or not.
They also talked about the impact on influencers, who may alter a company’s message as they look to make a quick buck. Michael believes that whilst it’s a restrictive move for influencers, it’s a necessary one to “bring order and due diligence” into the sector. Influencers will now have to apply for S21 cover themselves if they wish to promote responsibly.
So what’s next? The new regime ensures that firms must either be registered with the FCA, or else go through one of the regulated companies to check their wording, marketing and promotions. They can’t simply ignore it and hope it goes away – or else they’ll be getting a knock on the door.
I would urge anyone active in the digital assets sector to listen to the podcast, and please do get in touch with us for a discussion about how best to comply with the new regime.
