UK financial regulator seeks comments on ad approval process that covers crypto

Crypto companies are likely to find it harder and more expensive to get their promotional materials approved in the U.K. if proposals put forward by the country’s financial regulator are accepted.

The Financial Conduct Authority (FCA)’s two-month consultation, which kicked off on Tuesday, suggests limiting the number of firms able to approve marketing communications. It would withdraw approval authority from companies authorized under the Financial Services and Markets Act 2000 and require an additional level of authorization to allow the FCA to monitor this activity more closely.

“Historically, we have seen too many non-compliant promotions being approved and then communicated by unauthorized firms to retail consumers,” the consultation said.

Crypto companies will be hit by any regulatory change resulting from the consultation if the Financial Services and Markets Bill that’s working its way through Parliament becomes law in its current form. Recent amendments to the bill would require crypto businesses’ ads to be approved by an FCA authorized firm, and that could produce a bottleneck.

The number of applications “with sufficient competence and expertise to approve crypto asset financial promotions will be limited at first,” the consultation said. It expects the number to grow over time.

The Treasury, the U.K. government's financial arm, is also expected to launch a consultation in coming weeks on how it plans to regulate the crypto industry. That is expected to give the FCA more guidance on how crypto will fit in with its promotion rules.

The FCA is consulting on whether a company that wants to be allowed to approve promotions should be checked for having “adequate systems, controls and processes in place” and whether it is able to maintain the records of the financial promotions it wants to oversee, that it is capable of checking they comply with the FCA rules and can assess the viability of what the business is advertising.

The FCA may also require that approving firms report twice a year on their approval activity. They may also have to notify the regulator when they approve, amend or withdraw the approval of a financial promotion within seven days of doing so.

"These proposals will ensure those approving ads have the appropriate expertise and are held accountable for the promotions they sign off," Sarah Pritchard, executive director of markets at the FCA, said in a statement.

The FCA is seeking responses by Feb. 7, 2023.