The financial regulator of the United Kingdom has issued a warning that crypto companies that are peddling their products in the country would soon have to obtain authorization to do so.
The Financial Conduct Authority (FCA) issued a new statement in which it said that criminal punishment would be applicable on companies that do not stick to one of the four routes that have been mandated for crypto promotion.
The regulatory body said that punishment could also include jail time of about two years.
The new rules
The new rules for crypto advertisement have been developed, but they will come into force only after they have been approved by the UK Parliament.
According to these rules, the crypto promotions would have to be developed by a person authorized by the FCA, or would have to be approved by one.
If these two routes are not taken, then the crypto advertisement has to come from a company that has already been registered with the financial regulator.
This means that it should be in compliance with the Transfer of Funds Regulations 2017 as well as Terrorist Financing and Money Laundering.
Compliance with these regulations would mean that among other things, the company in question would have to have an office in the United Kingdom.
The fourth and last route is that companies would be allowed to promote crypto products that have an exemption from the Financial Promotion Order.
In the event that these four routes are not taken, then the promotion would be a violation of the Financial Services and Markets Act 2000 (FSMA), specifically its Section 21.
The FCA also asserted its opinion that all ‘crypto assets’ are deemed as high risk by the regulatory authority.
It highlighted the downfall of the various centralized exchanges that happened last year as evidence of the risk and said that they need to be prepared to lose their entire capital.
Crypto ads in the UK
For years, regulatory authorities in the United Kingdom have been taking a hard look at crypto advertising.
In June 2021, an advertisement campaign launched by Luno, a crypto trading app focused on consumers, which is a subsidiary of the Digital Currency Group (DCG) had been banned.
The campaign was a high profile one and it had run on the London Underground for about six months. It encouraged people to purchase Bitcoin.
The Advertising Standards Authority (ASA) in the United Kingdom deemed the campaign misleading and irresponsible.
This latest news about rules for crypto advertisement comes, as there appears to be a rapid shift in the rules that apply to the crypto industry in the United Kingdom.
At the beginning of this month, a host of new rules were announced in the country that would apply to different areas of the crypto industry.
The said rules covered everything from the authorization and licensing process applicable to crypto exchanges to the rules that would apply to crypto custody services.
This focus on crypto comes after the fiasco that occurred in the industry in November with the downfall of the FTX exchange which has highlighted the need for regulation.