UK Treasury Proposed Bringing Crypto Promotions Under FCA Rules

HM Treasury on July 20, 2020, proposed bringing promotions for certain cryptoassets inside the United Kingdom’s established financial-promotions regime. The consultation marked a potentially important expansion of the regulatory perimeter: communications encouraging consumers to acquire covered tokens could face standards and restrictions associated with conventional financial products.

The development was a proposal, not a rule already in force. HM Treasury requested responses through October 25, 2020, and explicitly described the consultation as something other than a definitive statement of government policy. Its stated objectives were stronger consumer protection and continued support for responsible innovation.

A targeted regulatory perimeter

The proposal centered on a new category called a “qualifying cryptoasset.” HM Treasury described it as a cryptographically secured digital representation of value or contractual rights using distributed-ledger technology that was both fungible and transferable, subject to several exclusions.

Security tokens already treated as controlled investments were excluded from the new category, as were electronic-money tokens and currencies issued by central banks or other public authorities. HM Treasury said most stablecoins would either fall within an existing category or be captured by the proposed definition, depending on their characteristics.

The focus on fungibility and transferability was deliberate. Tokens confined to closed systems or lacking interchangeability could remain outside the proposed definition. The consultation also proposed an exemption for communications that merely said a buyer or seller was willing to use qualifying cryptoassets as payment for goods or services.

This distinction mattered institutionally. HM Treasury was proposing to regulate invitations and inducements associated with acquiring or disposing of qualifying cryptoassets, not to make every activity involving those assets a regulated financial service. The document considered the broader alternative of classifying the assets as specified investments, which could have required firms conducting a wider range of crypto activities to obtain authorization, but questioned whether that approach would be proportionate.

Why promotions drew attention

The consultation relied partly on Financial Conduct Authority consumer research published on June 30, 2020. That research estimated that 5.35% of UK adults held or previously had held cryptocurrency, equivalent to approximately 2.6 million people. The estimate came from an online panel fielded from December 13 through December 21, 2019, with a nationally representative starting sample of 3,085 respondents; its method differed from the face-to-face survey used for the FCA’s preceding study.

For more detailed owner questions, the FCA combined 165 current or former owners from the representative sample with a separate boost sample of 493 owners, producing 658 respondents. Within that combined owner sample, 45% reported seeing a cryptocurrency-related advertisement. Among respondents who had seen one, 35% said it made them more likely to purchase.

Those figures were survey findings rather than transaction records, market-volume measurements or on-chain observations. The boosted owner sample also was not independently representative of every UK crypto holder. Nevertheless, the results supplied contemporaneous evidence for the government’s concern that advertising could influence consumers who misunderstood the protections available to them.

What the proposal did not settle

The July 20 documents did not establish which firms would ultimately qualify to approve crypto promotions, what detailed FCA rules would apply or when any resulting regime would begin. A parallel consultation proposed requiring authorized firms to obtain specific FCA consent before approving promotions for unauthorised businesses, but that too remained subject to consultation.

The immediate significance was therefore directional. The government was signaling that crypto promotions could no longer be treated solely as ordinary advertising when they encouraged investment-like behavior. For exchanges, token issuers and marketing partners, the proposal raised the prospect that promotional communications would need authorization, an applicable exemption or approval through the regulated financial system. On July 20, 2020, however, those consequences remained proposals awaiting responses and later government action.