UK’s FinProm a welcome change, but challenge persists — Transak compliance head
On Oct. 8, the United Kingdom’s Financial Conduct Authority (FCA) imposed new marketing rules compelling cryptocurrency firms to promote their products and services clearly, fairly and transparently.
From banning referral bonuses to crypto firms implementing a 24-hour cooling-off period for first-time crypto investors, the stricter Financial Promotions (FinProm) regime aims to help protect consumers from high risks associated with virtual assets.
The cooling-off rule, in particular, presents an opportunity for users to discern crypto investments and strengthens the credibility of crypto and its community, James Young, compliance head and money laundering reporting officer at on-ramp firm Transak, told Cointelegraph in an exclusive interview. He added:
“The more regulations that come through, the more protection there is for consumers. I think the safer crypto is perceived and, therefore, adoption is increased on an exponential scale.”
However, considering the popularity of referral bonuses as a marketing tool across different industries, Young noted that other crypto firms would need more clarity on the kind of incentive schemes still available.
“It certainly did come as a bit of a surprise,” Young admitted. “I don’t think there are any other industries that the FCA has really imposed this very strict ban on like that… I’m not quite sure how the [cooling-off period and ban on incentives] marry up. I think it needs to be proportionate.”
The new regulations come as the U.K. emerges as an attractive global crypto hub amid the ongoing regulatory crackdown in the United States. But while some major crypto firms such as exchange OKX and payments platform MoonPay have already announced plans to comply with FinProm, the new rules proved to be difficult for some players given the global scale of their operations.
Crypto exchanges Binance and Bybit, for instance, have halted the onboarding of new U.K. users to their platforms. Services from both in the jurisdiction will wind down as they attempt to comply with the new regulations.
Young claims that the FCA soon realized that the new financial promotion rules were going to prove “very challenging” for firms to instantly implement in light of the other rules companies should comply with.
Related: Binance halts onboarding of new UK users
“[Before] we just had to comply with Anti-Money Laundering regulations to now these broader brush regulations around conduct and communication,” he noted.
In September, the FCA extended the deadline for U.K.-registered crypto firms to address technical issues related to the new marketing regime to Jan. 8, 2024.
Uniform crypto regulations across the globe
When asked about global crypto firms complying with the new FCA rules while ensuring consistent conformity and user experience in other jurisdictions, Young said that there needs to be segregation in legal entities to seamlessly pocket the different regulatory requirements, adding that “it’s something that the FCA called out as a challenge that they’ve identified firms facing, particularly those with complex group structures.“ This, he says, is because:
“It’s something that the FCA called out as a challenge that they’ve identified firms facing, particularly those with complex group structures… “You have some countries that are very tight, like the U.K., in terms of marketing of actual promotions, and others that haven’t even really considered what they want to do with crypto firms yet in terms of regulation.”
While acknowledging the hurdles regulators face in future-proofing regulations, Young called for regulatory uniformity in view of the different crypto regimes across various jurisdictions:
“Crypto by its nature is a global thing… I would very much like to see more uniformity across the globe from regulators in terms of how they look to regulate crypto... Secondly, I would really like to see more detailed guidance [about] how crypto firms are expected to comply with these new regulations.”
Calls for a wider global framework for the crypto industry are not new. On Oct. 13, the Group of Twenty (G20), an intergovernmental forum comprising 19 sovereign countries, including the U.K., unanimously accepted a crypto regulatory roadmap that advocates for comprehensive oversight of crypto within and beyond G20 jurisdictions.
While Young believes crypto mass adoption could be facilitated through regulation and trust in the industry, he noted that the FCA and other regulators should strike the appropriate balance between consumer protection and innovation.
“I welcome regulation, but it does have to be proportionate and balanced. It should not be designed or indirectly designed to drive firms out of the market. It must be a proportionate approach that is fair to the emerging nature of the market and where it is currently.”
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