HM Treasury posed three questions in a sister consultation to one on financial promotion of cryptoassets. Here are our responses:
1.Do you agree that a gateway should be established enabling the FCA to assess the suitability of a firm before it is permitted to approve the financial promotions of unauthorised persons?
Many feel cryptoassets are not regulated financial instruments and should therefore fall outside the scope of regulation. Some of our members are of course regulated in relation to financial instruments that fall within the scope of regulation, so there is a lack of clarity as to how cryptoassets should be treated across the sector, and as to what level of knowledge or experience should be required to sign off on cryptoasset promotions. This is a highly technical area, and there are competition considerations too. Our proposed solution is to set up an independent organisation with regulatory oversight which would approve cryptoasset promotions specifically. Crypto should not be considered in the same light as traditional financial instruments. Crypto firms already have to follow AML rules and may have to contribute to a future economic crime levy, so it will be important to ensure that regulation and tax do not stifle the sector at its birth, particularly as crypto firms could easily establish elsewhere if needs be. We suggested a senior marketer within a firm could also look at crypto promotions. Regulatory delays are already happening on AML authorisations (only 4 crypto firms approved so far), and we do not want delay in relation to a potential crypto promotions regime.
2. What are the risks and benefits of each of the two policy options put forward? Would there be any unintended consequences resulting from implementation?
One of the other key risks is the lack of quantitative data on crypto, so we have asked The Government to obtain more data, and contrast that against data for other financial instruments so that a fair comparison can be made. Such an approach would be more scientific and avoid inappropriate regulation on this new and important asset class. It would also ensure that the UK will remain competitive in global crypto development.
3. If the government was to proceed with one of the two policy options, which would be your preference and why?
Our preference is for Option 1 (Restrict approval of the financial promotions of unauthorised firms through the imposition of requirements by the FCA – GATEWAY), to keep the regulatory burden on crypto firms to an appropriate and proportionate level.
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