HM Treasury has opened a consultation, ‘Cryptoasset promotions’ into a government proposal to bring the promotion of certain types of cryptoassets within the scope of financial promotions regulation. The proposal is intended to enhance consumer protection while promoting responsible innovation and views are sought up until 25 October.

  • In October 2018, the Cryptoassets Taskforce published its Final report into the potential impact of cryptoassets on UK consumers and business. The report concluded that the priority for the authorities should be to take action to mitigate the risks that cryptoassets pose to consumers and market integrity.
  • Several steps have been taken by the Taskforce toward mitigating these risks, including the opening of this consultation, the completion of previous consultations on consumer protection risks and implementing a comprehensive response to the use of cryptoassets for financial crime.

Financial promotions regime

  • The financial promotions regime consists of various legislative restrictions set out in the Financial Services and Markets Act 2000 (FSMA), Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (FPO) and specific rules set by the Financial Conduct Authority (FCA).
  • The regime aims to ensure consumers are provided with clear and accurate information for financial decision-making which is appropriate to their specific circumstances.
  • In particular, the regime includes a financial promotion restriction which broadly prohibits an unauthorised person from making a financial promotion (e.g. an invitation or inducement to engage in investment activity) that either has not been approved or communicated by an authorised person or is not exempt. Breach of this restriction is a criminal offence.
  • Currently, security tokens and e-money tokens fall within the regime and are treated as ‘controlled investments’. Exchange tokens and utility tokens are not subject to the regime. These are categorised by the FCA as ‘unregulated cryptoassets’.

 Government proposal

  • The government proposes to extend the legal definition of controlled investments to include unregulated cryptoassets and bring them within the scope of financial promotions regulation. There is no agreed definition for unregulated cryptoassets. A draft definition for consideration is included in the consultation document.
  • Fungibility (the ability to freely replace one asset with another of a similar nature) and transferability are considered to be critical features of the draft definition as they are also core characteristics of money and a range of widely-used, regulated products and services.
  • Cryptoassets with these features are significantly more likely to give rise to consumer protection concerns as they are often purchased with similar expectations that consumers have when buying regulated financial products and services.
  • The government also proposes to
    • Amend the existing list of controlled activities under the regime to capture risky activities that may be unique to cryptoassets.
    • Add a new exemption covering cryptoassets which are merely offered and accepted in exchange for goods and services.
    • Consider alternative policy options for addressing consumer protection risks such as broader regulatory measures for cryptoassets that go beyond financial promotions.
  • No transition period is proposed and the government does not intend to amend the territorial scope of the regime which currently applies to all firms in the UK and overseas which issue promotions to UK customers.

Consultation questions

HM Treasury's consultation document seeks answers to the following questions and asks, wherever possible, that evidence to support your response be included.

  1. Do you have any comments on the proposed definition of qualifying cryptoassets?
  2. Do you agree that the correct tokens have been excluded from scope under this proposal?
  3. In your view, which of the controlled activities in Part 1 of Schedule 1 to the FPO correspond most closely to activities undertaken by firms in the cryptoasset space? Which firms are undertaking these, and what services are they providing in particular?
  4. Do you agree that the list of controlled activities under the FPO given at paragraph 4.29 best captures the activities undertaken by firms in the cryptoasset space which facilitate the buying, selling, subscribing for and underwriting of cryptoassets and whose activities are most associated with the risks this consultation seeks to mitigate? Do you agree that the government is, therefore, proposing to amend the correct set of controlled activities under the FPO?
  5. In your view, would the activities described in paragraph 4.31 fall within the scope of the FPO if the controlled activities under the FPO (particularly those at paragraph 4.29) were amended to apply to cryptoassets? Are there other important activities undertaken by cryptoasset firms that pose similar risks in relation to the purchase of cryptoasset that are unlikely to be captured by the controlled activities the government proposes to amend (paragraph 4.29 above)?
  6. Do you have any other comments on the proposed treatment of controlled activities?
  7. Do you have any views on the government’s proposed treatment of exemptions?
  8. Do you agree with the government’s assessment of the risks in the cryptoasset market, as summarised above and as outlined in detail in the Cryptoassets Taskforce report?
  9. Do you agree with the government’s assessment of alternative policy options?
  10. Do you have any views on the government’s proposal not to provide for a transitional period?
  11. Do you have any views on the proposed approach to territoriality?
  12. Do you have any additional comments to make on the proposed approach?
  13. Promotion costs/challenges
    • How many promotions annually would you estimate that your firm would need to have signed off by a firm authorised under FSMA?
    • Do you have an estimate of the costs of (or qualitative assessment of the challenges involved in) redesigning promotions to make them compliant with the law?
    • Do you have an estimate of the costs of (or qualitative assessment of the challenges involved in) having promotions signed off by a firm authorised under FSMA?
  14. Comparative impacts on firms
    • Do you anticipate that the proposed measure would impact some firms more than others? E.g. do some firms rely more heavily than others on promotions?
  15. Market sizing and overall firm impact
    • Do you have an estimate of the number of firms that would be affected by this measure?
    • Do you have estimates of the value of the cryptoasset market in the UK?
    • Do you have estimates as to the annual turnover and/or profits of the average firm that would be affected by this measure?
  16. Consequences for the UK market
    • Do you have any views as to the impact that the above policy proposal, if introduced, would have on the cryptoasset market in the UK?

The closing date for responses is midnight on 25 October 2020.

Email responses should be sent to This email address is being protected from spambots. You need JavaScript enabled to view it..  Alternatively, please send any written responses by post to Consultation on cryptoasset promotions, Cryptoassets branch, Payments and FinTech (1 Blue), Financial Services Group, 1 Horse Guards Road, London SW1A 2HQ.


Cryptoassets Taskforce Final Report: Highlights
The Cryptoassets Taskforce has published its final report. The 'Cryptoassets Taskforce Final report' lays out the UK’s policy and regulatory approach to cryptoassets and distributed ledger technology in financial services. It did not cover tax.

How are Bitcoin, cryptocurrencies or cryptoassets taxed in the UK?
How do you tax Bitcoin? Are cryptocurrency or cryptoasset gains or profits, taxable? Can you obtain tax relief if you make losses on Bitcoin? Gains on transactions in cryptoassets are potentially taxable in the same way as other investments. 

External link

Cryptoasset promotions, HM Treasury consultation, July 2020