.svg)
Crypto firms continue to flaunt the UK’s new rules on financial promotions, France opens applications for authorisation under MiCA, and Coinbase responds to allegations of campaign finance violations.
The UK Financial Conduct Authority (FCA) has published its latest review of compliance with its new crypto-asset promotion rules that went live in October last year.
The FCA found that there is significant room for improvement among both authorised and unauthorised firms, after analysis of data from Q2.
“We found some examples of firms demonstrating good practice, which we have shared in our good and poor practice to help firms get their compliance with the rules right,” the regulator said.
“However, we also found multiple instances where firms did not meet the required standards.”
In Q2 2024, the FCA issued 528 alerts against unauthorised firms and individuals found to be in violation of the rules.
This was a slight reduction from the 597 alerts issued during Q1, but it brings the total alerts against unauthorised firms and individuals to well over 1,000.
In both Q1 and Q2, the FCA said that 11 percent of the alerts issued were in response to so-called “clone scams”.
A clone scam is when an attacker copies an email from a legitimate company and turns it into a malicious email. This is typically done by changing key details within the text, such as links to related pages.
These links can be used to spread malware or to divert the recipient to fake websites, where sensitive information such as passwords and credit card details may be entered.
Under the crypto-asset promotion rules, only authorised firms are allowed to approve their own promotions before communicating them to customers.
Unauthorised firms, which make up the vast majority of firms in the crypto sector, have to submit their promotions to an authorised firm for approval before publishing.
“We have seen firms relying on industry comparisons to benchmark what is acceptable,” the FCA said.
“Given the levels of poor practice in the market, firms should not be doing this. Instead, we expect firms to engage with us directly to drive up standards across the sector.”
The regulator also said that if firms do not improve it will have no choice but to turn to enforcement action.
Speaking to Vixio, trade association CryptoUK said there are still some areas that the FCA needs to “clarify” in order to ensure that firms understand their obligations and can adhere to the rules.
“Our members have worked hard to ensure the necessary processes and procedures are in place, sometimes on short timescales,” said Su Carpenter, the trade group’s executive director.
“But we and our members welcome the ongoing engagement with the regulator to ensure standards are increased and maintained.” Under the crypto-asset promotion rules, only authorised firms are allowed to approve their own promotions before communicating them to customers.
UK crypto regulation delayed by snap election
In future, when crypto-assets are brought within the financial services regulatory regime as “investments”, the FCA said that previous compliance with the promotions rules will be considered in authorisation decisions.
As covered by Vixio, a forthcoming regulatory framework for crypto-assets was expected to be drafted and introduced to parliament in 2024.
Early this year, as set out by the Bank of England, a bill to regulate fiat-backed stablecoins was expected to be introduced to parliament, followed by a separate bill to regulate crypto-assets.
However, due to the snap election called by former Prime Minister Rishi Sunak, this timetable is no longer valid.
The two bills will eventually be laid as secondary legislation under the Financial Services and Markets Act 2023 (FSMA 2023).
After receiving royal assent in June last year, the FSMA 2023 granted the government the authority to bring stablecoins and crypto-assets into the remit of financial services regulation.
France opens applications for crypto firms under MiCA
France’s Financial Markets Authority (AMF) has begun accepting applications for authorisation of crypto-asset service providers (CASPs) under the EU’s Markets in Crypto-Assets (MiCA) regulation.
With only five months to go until all MiCA provisions come into effect, the AMF is urging firms to understand their obligations and apply for authorisation if necessary.
From December 30, 2024, firms providing one of ten designated crypto-asset services will be required to obtain mandatory authorisation under MiCA.
The ten services include operating a crypto-asset trading platform; exchanging crypto-assets for fiat currency; and providing custody and administration of crypto-assets on behalf of clients.
In France, MiCA will replace the existing regime of “simple” and “enhanced” registration with the AMF for digital asset service providers (DASPs).
Firms currently registered as DASPs have until June 30, 2026 to obtain MiCA authorisation to continue providing their services beyond July 1, 2026.
However, during this transition period, such firms will not be able to take advantage of the passporting rights offered by authorisation under MiCA.
Coinbase respond to campaign finance allegations
Last week, Vixio reported on a campaign finance complaint against Coinbase ahead of the 2024 federal elections in the US.
In May, Coinbase donated $25m to FairShake, a super political action committee (PAC) that supports congressional candidates pushing for crypto-friendly legislation.
At the time of the donation, Coinbase was already bidding to become a federal contractor for the US Marshals Service, an agency within the Department of Justice (DOJ) that handles asset seizures. One month later, the agency confirmed that it had awarded the contract to Coinbase.
Molly White, a US-based crypto journalist, and Public Citizen, a consumer advocacy group, have alleged that the FairShake donation violated a long-standing prohibition against political donations by current or prospective federal contractors.
White, who spoke with Vixio last week, has since filed a complaint against Coinbase with the Federal Election Commission (FEC), which is co-signed by Public Citizen.
This week, Coinbase’s chief legal officer, Paul Grewal, took to X to accuse White and Public Citizen of spreading “misinformation”.
In Grewal’s view, Coinbase is not a federal contractor because the US Marshals Service is not paying Coinbase using funds appropriated by Congress.
Instead, Coinbase will be paid using the proceeds of property forfeited to the US government under the DOJ’s Assets Forfeiture Program.
White and Public Citizen have not retracted their complaint.
