The article, published in the March-April 2024 issue, noted that the Financial Conduct Authority's (FCA) new rules, taken together with the enactment of the U.K. Financial Services and Markets Act 2023, bring cryptoassets fully into the U.K.'s broader financial regulatory regime. This brings "qualifying cryptoassets" into the financial promotions regime, which is set out in the Financial Services and Markets Act 2000 (FSMA).

It's mandatory for anyone conducting cryptocurrency business in the U.K. to be aware and adhere to these new rules, they wrote.

"The rules are sufficiently broad that a number of firms, including ByBit and PayPal, have elected to temporarily suspend operations in the United Kingdom, presumably to obtain additional time required to develop UK-specific marketing copy and compliance procedures," they wrote. "Many firms, however, have not done so. As a result, on Oct. 9, 2023, the FCA issued 146 alerts with respect to noncompliant firms making cryptoasset promotions to U.K. consumers in violation of the new regime."

Due to the requirement that "qualifying cryptoassets" be fungible, products that use a nonfungible data structure such as procedurally generated art nonfungible token collections are more likely to not be captured by the new regulations. These new rules also prohibit incentives to invest such as "refer a friend" bonuses, mandate a 24-hour "cooling-off" period between a consumer receiving a direct offer financial promotion and being able to invest, and more robust appropriateness rules for cryptoassets.

Under the new law, they wrote, inducements to invest in crypto made in the course of business cannot be communicated to consumers unless they are made by an entity with the right license and the marketing complies with certain rules about its content.

"Given that breaching the financial promotion restriction is a criminal offense, with penalties for noncompliance, including fines and possible imprisonment, strict adherence to the rules is a must," they wrote. "[C]ompanies seeking to provide services to U.K. customers should understand that the aggressive stance the FCA is taking with regard to cryptocurrency service providers, including a number of industry majors, represents a major departure from the U.K.'s prior approach to these issues, which was considerably more laissez-faire. Companies not in compliance, particularly any named by the FCA, should seek to create and implement a U.K. compliance program as swiftly as possible."

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