US Regulation

UK Regulation

Financial Promotions Regime for Cryptoassets

The FCA’s Financial Promotion Regime for Cryptoassets took effect on 8 Oct 2023 and applies to all firms that market cryptoassets to UK consumers, regardless of whether the firm is based overseas. To ensure firms clearly understand the requirements for cryptoasset promotions, alongside the FCA final rules (PS23/6) for Cryptoasset Financial Promotions published on 8 Jun 2023, the FCA published the Final Guidance for Cryptoasset Promotions (FG23/3) on 2 Nov 2023.
Under the regime, cryptoasset financial promotions must be fair, clear, and not misleading. SupraFin offers crypto risk analysis reports that can help with the required due diligence and the actual financial promotions.

Admissions & Disclosures and Market Abuse Regime for Cryptoassets

In December 2024, the FCA published a discussion paper titled “Regulating cryptoassets: Admissions & Disclosures (A&D) and Market Abuse Regime for Cryptoassets” (click the following link to access this paper https://www.fca.org.uk/publication/discussion/dp24-4.pdf).

Consumer Duty: Compliance with the Consumer Duty may require disclosures beyond those under A&D. In essence, the Consumer Duty will apply across the cryptoasset distribution chain, from product and service origination through to distribution and post-sale activities. This can include firms that do not have a direct customer relationship. The Consumer Duty may apply to firms in the wholesale sector that can determine or have a material influence over retail customer outcomes.

Disclosure Requirements:

• The Admission Document: There needs to be an admission document that would provide the core information a consumer needs to make an informed decision. Once accepted, the admission document would be filed on the National Storage Mechanism (NSM).
• Necessary Information Test for the Admission Document: There would be a ‘necessary information test for cryptoasset admission documents. This legal standard holds document preparers liable for consumer losses if they omit crucial information that would have helped consumers make informed investment decisions. This test would require minimum disclosures on features, prospects and risks of the cryptoassets, rights and obligations attached to the cryptoassets (if any), an outline of the underlying technology (including protocol and consensus mechanism), and where applicable and available, details of the person seeking admission to trading on a Cryptoasset Trading Platform (CATP).
• More detailed disclosures: Per public offers and prospectus regime in the POATRs, the FCA is considering introducing more detailed disclosure requirements in their Handbook rules to cover information related to governance, operational & cyber resilience, cryptoasset features, crypto ownership concentration, track record, stability mechanism, etc.
• Who is Responsible and for What? The person who initiates the application for admission to trading would be responsible and subject to the associated liability for the production and publication of any required admission documents, including if this person is the Cryptoasset Trading Platform (CATP) itself.
• Due diligence: The CATP would need to undertake due diligence on the issuer, any other persons associated with the offer, and the content of the admission document. The CATP would make a summary of this due diligence public.
• The CATP would take its own decision, based on an assessment of the likelihood of consumer detriment and level of comfort from its due diligence, on whether to approve or reject the application for admission to trading.

Liability Regime:

• The document preparer could be held liable for consumer losses if they did not include necessary information material to a consumer making an informed assessment of the cryptoasset.
• Statements relied on by consumers must be accurate. The Treasury proposed that the persons responsible for cryptoasset admission documents (including, in some cases, the CATP itself) should be liable for their accuracy. In general, and in line with the standards in the traditional securities market, the liability standard applied will be the ‘negligence’ standard under FSMA 2000 (see section 90 and schedule 10).
• In line with the approach in the public offers and admissions to trading regime under the POATRs there is a proposal to create a more favourable environment for the inclusion of forward-looking statements in cryptoasset admissions by adopting a lower liability standard (reckless instead of negligence) for issuers for certain type of forward-looking statements.

Rejection of Admission to Trading:

• CATPs would be required to publicly disclose their standards for admission of cryptoassets to trading, as well as their criteria for rejecting admissions.
• CATPs would be required to reject admission of cryptoassets if they consider that there is a significant risk this may result in consumer detriment. This approach would be similar to the FCA’s proposals for Public Offer Platforms (POPs) under the public offers and admissions to trading regime (see CP24/13).
• An outcomes-based rule would specify a non-exhaustive list of factors that CATPs will have to assess as part of their admission process. These CATPs must satisfy themselves that they understand any significant risks of consumer detriment related to these factors. Risks of consumer detriment may include, for example, material flaws in the design of the cryptoasset or its underlying technology, which might lead to a significant decrease in the value of the cryptoasset. These rules would ensure consistency and uphold high standards across CATPs when it comes to admitting cryptoassets to trading.
• Supervisory or Enforcement Action/Private Legal Action: If a CATP fails to comply with the FCA requirements or if there is evidence of negligence or misconduct, the FCA has the option of taking supervisory or enforcement action. Consumers may also have the right to take private legal action against the CATP under section 138D of FSMA 2000 for any contravention of an FCA rule.

Ongoing disclosures: Ongoing disclosures would be required after a cryptoasset is admitted to trading.

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