Advertising cryptoassets - new rules now in force

On 8 October 2023, the much-heralded changes to the regulation of advertising of cryptoassets came into force.

The FCA is now responsible for regulating technical claims in advertising for cryptoassets, although the ASA will still be responsible for other aspects under the CAP Code, such as matters relating to offence, social responsibility, superiority claims, fear and distress, denigration and other claims that do not relate to specific characteristics of the product. 

The FCA has taken over the regulation of ads for "qualifying cryptoassets" – cryptoassets that are transferable and fungible, including cryptocurrencies and utility (fan) tokens – and introducing new rules. The rules apply to all firms marketing qualifying cryptoassets to UK consumers, regardless of which country they are based in, or the technology used. However, cryptoassets as a product remain unregulated. 

The FCA has classified cryptoassets as ‘Restricted Mass Market Investments’, meaning that they can be mass marketed to UK consumers subject to certain restrictions, in addition to the overarching requirement that financial promotions must be fair, clear and not misleading. 

The restrictions include: requirements to include clear risk warnings; risk summaries and a ban on incentives to invest such as refer a friend bonuses and new joiner bonuses.

Following this change, there are four routes cryptoasset firms can take to lawfully communicate cryptoasset promotions:

• An authorised person communicates the promotion.
• An authorised person approves the promotion.
• A crypto firm registered under the Money Laundering Regulations communicates the promotion.
• The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.  

The ASA will refer complaints about technical aspects in non-broadcast ads to the FCA. CAP has reflected the remit change in its advice and guidance.

The ASA emphasises that there is a clear separation between ads for legal cryptoasset investments and illegitimate scam ads referring to cryptoassets that link to fraudulent content. On the latter, the ASA will continue to take action where it can to disrupt online scams through its Scam Ad Alert system.

The FCA has said that it issued 146 alerts in the first 24 hours of the new regime, which highlight organisations which are either running scams or acting without authorisation.  Companies need to be aware of the new regime and ensure that they are operating within it.

What about NFTs?

The new rules do not cover cryptoassets that are non-fungible, such as Non-Fungible Tokens (NFTs), or Limited Payment Tokens that can only be redeemed with the issuer and used for the payments of specific goods and services, such as non-monetary customer loyalty points. Advertising for these will continue to be regulated by the ASA.