Cryptoassets – new FCA guidance and a new consultation

The FCA’s new guidance, which is designed to give people a better understanding of what they are investing in, and the risks involved. And a consultation on a new Discussion Paper to help develop the FCA’s regime for fiat-backed stablecoins including when used as a means of payment.

New guidance for crypto firms to help them comply with marketing rules

Following a change in legislation, cryptoassets promotions targeting UK consumers now fall within the FCA’s remit.

Following a consultation, the FCA has published Guidance to further support crypto firms complying with the new marketing rules. The Guidance also details how authorised firms communicating or approving financial promotions should apply the Consumer Duty to their marketing.  

To further support firms make necessary improvements to their marketing, the FCA previously published examples of good and poor practice on firms’ preparations for the new financial promotions rules. 

It says that it continues to remind people that despite these new rules, cryptoassets remain high-risk and people should be prepared to lose all the money they invest. 

Consumers should check the Warning List before making any investment in cryptoassets. The list is intended to help consumers make more informed investment decisions by finding details of unauthorised firms the FCA is aware of. It should also help consumers understand which firms may be providing or promoting financial services or products in the UK without the FCA’s permission. 

New Discussion Paper

The Treasury’s recent Policy Statement sets out their intention to define fiat-backed stablecoins in legislation, expecting it to capture those stablecoins which seek to maintain a stable value by reference to a fiat currency, and hold (in part or wholly) currency as ‘backing’. Please see our earlier Bulletin.

The Treasury is also considering making changes to the payments legislation to enable retail payments for goods and services to be made using fiat-backed stablecoins. This includes an option the Treasury are exploring to allow certain stablecoins which are issued outside of the UK (overseas stablecoins) to be used for payments.

The FCA says that its Discussion Paper will be a part of a joint publication package with the Bank of England’s Discussion Paper on systemic payment systems using stablecoins and related services providers, and the Prudential Regulation Authority’s Dear CEO letter on innovative uses of deposits, e-money and stablecoins. To accompany these publications, it is also publishing a joint ‘Roadmap paper’ with the Bank and Prudential Regulation Authority which aims to explain how its proposed regimes interact and its approach for dual regulation. 

This Discussion Paper will interest anyone in the UK who has bought, or may in the future buy, fiat-backed stablecoins. This regime will also interest organisations and individuals that participate in the cryptoasset sector (specifically, cryptoassets that claim a form of stability and make use of a stabilisation mechanism). It will particularly interest:  

  • firms or individuals that design, issue or maintain a fiat-backed stablecoin;  
  • firms that provide custody for, or safeguarding ownership of, fiat backed stablecoins – or the ‘private keys’ to access them (this will include any entity that takes custody of stablecoin, no matter how briefly, for example an exchange that does so to facilitate a trade);  
  • retail payment service providers, which may consider using fiat-backed stablecoins as an alternative means of payment;  
  • cryptoasset firms providing services to UK consumers for fiat-backed stablecoins industry groups/trade bodies;  
  • professional advisers;  
  • consumer groups and individual consumers;  
  • policy makers and other regulatory bodies; 
  • industry experts and commentators;  
  • academics and think tanks.

The FCA has asked for feedback by 6 February 2024. It will consider feedback to decide its next steps and it will consult on any proposals in this Discussion Paper if it proposes to adopt them as part of its final rules.

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