CryptoUK and members write open letter to Andrew Griffith MP, Financial Secretary to the Treasury and City Minister in relation to the proposed Financial Services and Markets Bill legislation on cryptoasset promotion
The following open letter was submitted to Andrew Griffith MP, Financial Secretary to the Treasury and City Minister in relation to the proposed Financial Services and Markets Bill legislation on cryptoasset promotion. You can read the full contents of the letter below, or download the PDF version here.
Dear Minister,
Re: Financial Services and Markets Bill legislation on cryptoasset promotion
I am writing on behalf of CryptoUK members to draw your attention to concerns regarding the Financial Services and Markets Bill, specifically the proposed new legislative powers relating to the promotions of cryptoassets.
We encourage appropriate consumer protection and the implementation of measures to ensure the highest standards of communications in financial promotions. Such measures ensure that consumers are fully aware of any associated risks before transacting, and are critical to the success of our industry and the safety of its customers. In the last 12 months CryptoUK and our members have partnered with initiatives such as Action Fraud’s ‘Stop Scams’ and engaged with the NCA and NECC to advise and inform on measures that consumers can take to safeguard themselves from fraud in this space. Additionally we have supported the ASA in the development of a guidance framework for advertising in the sector given its position of being outside of the current regulatory scope.
However, we do ask that any regulation also empowers consumers to invest and transact in cryptoassets safely and confidently, whilst keeping in consideration that there are multiple additional use cases for this technology outside of just investments and these would also be subject to any de-facto full prohibition of services providers promoting their technology and services.
Our primary concern, and that of our members, is that the solution proposed within the Bill, namely the requirement for companies authorised to offer cryptoassets requiring FSMA authorisation or exemption, is not necessarily the right way to address this issue.
We believe that implementing this regime will bring into play disproportionately restrictive barriers and create an unbalanced environment for cryptoasset providers by unnecessarily
consolidating market power to existing FSMA-authorised firms in the UK – leading to significantly negative outcomes for the organisations we represent.
We believe that should this solution be implemented it will both unfairly concentrate market power for those firms which are already authorised by the FSMA and potentially encourage unauthorised firms to operate from outside of the UK, thus creating a competitive disadvantage for UK-based organisations and also undermining consumer safeguards.
The proposal set out in the Bill indicates the financial promotions regime will apply to ‘any cryptographically secured digital representation of value or contractual rights which is fungible and transferable’. This definition will capture a significant range of cryptoassets that currently fall outside of FSMA rules.
We believe that there are also potential issues in relation to the FCA’s financial promotions gateway, which requires all approvers of financial promotions to have an understanding of cryptoassets and have a part 4a permission (defined by the FCA as ‘a permission given by the FCA or PRA under Part 4A of the Act (Permission to carry on regulated activities), or having effect as if so given’) to act as an approver. This point was raised as an ongoing concern during the most recent Treasury Select Committee hearing (7 Dec 2022) and has been highlighted on numerous occasions through letters from ourselves and other trade associations representing the sector (Innovate Finance and GDF) and in a letter from the Chairs of the APPG’s for FinTech and Crypto & Digital Assets to HMT earlier this year.
This has the potential to introduce an overly restrictive regime, based on the incredibly small number of organisations which would meet that criteria for approver status.
We believe the Bill should be amended to resolve these issues and allow an equal and competitive environment for the cryptoasset business to continue to grow and innovate safely, whilst operating within appropriate safeguards and offering education and information to all consumers.
Our proposed solution would include the following considerations:
The Bill currently proposes to assign certain cryptoassets as ‘controlled investments’ for the purposes of the UK’s financial promotions regime. What this means in terms of regulation is that unless a firm holds a ‘part 4A’ permission under the Financial Services and Markets Act, in the UK it would be prevented from making financial promotions unless the promotion has been approved by someone who does hold part 4A permission. This would mean many of our members being unable to make financial promotions in respect of their own products and services.
We believe the Bill should be amended to enable registered firms within the sector to conduct their own financial promotions and allow the ability for the approval process to be streamlined and simplified whilst ensuring compliance with rules that the FCA create and implement directly relevant to the promotion of cryptoassets.
We would welcome the opportunity to work in collaboration with both the FCA and HMT to create a framework that provides optimum protection for consumers and still allows UK cryptoasset providers to be able to promote their own services without being negatively impacted by the proposed restrictions being enforced.
CryptoUK and its members would also very much appreciate the opportunity to discuss this with you in person and explore alternative solutions and potential amendments to the Bill. We look forward to hearing from you on whether a meeting is possible.
Yours Sincerely,
Ian Taylor, Executive Director, CryptoUK – and on behalf of our members (ian@cryptouk.io)
About CryptoUK
CryptoUK is an independent industry body that exists as a cohesive, credible voice for the evolving UK crypto industry. It represents the UK’s crypto asset sector, working directly with policymakers and market players to advocate for better education, mutual understanding, and fair and balanced policy. Its 155+ members include crypto natives, services, custodians, and institutional investors.
CryptoUK works with policymakers and agencies to improve protections where they are needed and remove barriers where they are not. It works with industry market participants to identify and promote use cases for digital and crypto assets which create value for UK PLC as well as promoting the UK crypto industry on the world stage. To find out more, please go to cryptouk.io.
