UK Finprom welcome change, but challenge remains – Transak compliance head

On October 8, the UK's Financial Conduct Authority (FCA) issued new marketing rules to require cryptocurrency companies to advertise their products and services openly, fairly and transparently.

From banning referral bonuses to implementing a 24-hour cooling-off period for first-time crypto investors for crypto companies, the strict Financial Promotion (FinProm) regime aims to protect consumers from the high risks associated with virtual assets.

The freezing law, in particular, will create an opportunity for consumers to understand crypto investments and strengthen the credibility of crypto and its community, James Young, head of community graph and financial fraud reporting officer at Trump company Transc, added in an interview:

The more regulations there are, the more protection there is for consumers. I think the more secure crypto is perceived, the more adoption will exponentially increase.

However, noting the popularity of referral bonuses as a marketing tool in various industries, Yang said other crypto companies still need to be more transparent about their incentive programs.

“It definitely came as a bit of a surprise,” Young said. “I don't think there are any other industries where the FCA has imposed such strict restrictions…I'm not sure how. [cooling-off period and ban on incentives] get married I think it should be affordable.

The new rules come as the United Kingdom emerges as an attractive international crypto hub amid ongoing regulatory theft 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 regulations have made it difficult for some players given their global scale.

Crypto exchanges Binance and Bybit, for example, have stopped admitting new UK users to their platforms. Both jurisdictions will fail when trying to comply with the new rules.

Young claims that the FCA soon realized that the new financial promotion rules would prove “very challenging” for companies to implement immediately, given the other rules that companies must comply with.

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“[Before] We now have to comply with these anti-money laundering laws around conduct and communication.

In September, the FCA extended the deadline for UK-registered crypto companies to January 8, 2024 to resolve technical issues related to the new trading system.

Uniform crypto rules around the world

Asked whether international crypto companies will comply with the FCA's new rules, while ensuring a consistent agreement and user experience in other jurisdictions, Yang said there is a need to separate the various regulatory requirements by legal entities. They identified organizations that faced challenges, especially those with complex team structures.” This is because:

“It's what the FCA has called a challenge, which organizations face, particularly those with complex group structures…” You have some countries, like the UK, that are very strict with proper promotions and others. They haven't yet considered what they want to do with crypto companies from a regulatory perspective.

Acknowledging the hurdles regulators will face in future proofing regulations, Young called for regulatory uniformity given the different crypto regimes in different jurisdictions.

“Crypto is a global thing by nature… I would like to see more uniformity around the world from regulators on how to regulate crypto… Secondly, I would like to see more detailed guidance. [about] How are crypto companies expected to comply with these new regulations?

Calls for a broader international framework for the crypto industry are not new. On October 13, the Group of Twenty (G20), a forum of nations comprising 19 sovereign nations including the UK, unanimously endorsed a crypto regulatory roadmap in favor of comprehensive regulation within the G20 and beyond.

While Young believes that crypto mass adoption can be facilitated by regulation and trust in the industry, he points out that the FCA and other regulators must maintain an appropriate balance between consumer protection and innovation.

“I welcome regulation, but it must be proportionate and balanced. It should not be designed or implied to drive firms out of the market. It should be a proportionate approach that is fair to the nature of the market and its current status.

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