Transak compliance head: UK’s FinProm is a positive move, but challenges still exist.
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James Young, Transak’s Chief of Compliance, shared insights with Cointelegraph regarding the recent regulatory developments in the United Kingdom’s crypto marketing landscape. While these new rules, instituted by the Financial Conduct Authority (FCA) on October 8, are viewed as beneficial for the cryptocurrency industry, they do pose certain challenges for businesses operating within the decentralized realm.
The FCA’s latest regulations mandate that cryptocurrency firms must promote their products and services in a clear, fair, and transparent manner. This entails significant changes, ranging from the elimination of referral bonuses to the implementation of a 24-hour cooling-off period for first-time crypto investors. The objective of this stricter Financial Promotions (FinProm) regime is to safeguard consumers against the heightened risks associated with virtual assets.
One notable aspect of the new rules is the cooling-off period, which offers users a valuable opportunity to evaluate crypto investments and reinforces the credibility of the crypto community. James Young, who serves as Transak’s Compliance Chief and Money Laundering Reporting Officer, expressed in an exclusive interview with Cointelegraph: “The introduction of more regulations enhances consumer protection and contributes to a perception of increased safety within the crypto space, potentially spurring exponential adoption.”
However, the abrupt ban on referral bonuses has raised questions, particularly for crypto firms accustomed to using such incentives as a marketing tool. James Young himself acknowledged the surprise, stating, “I don’t believe there are many other industries that the FCA has subjected to such a stringent ban. The alignment between the cooling-off period and the ban on incentives requires further examination to ensure proportionality.”
The introduction of these new regulations comes at a time when the United Kingdom is emerging as an attractive global crypto hub, especially in light of regulatory challenges in the United States. Notably, some major players in the crypto industry, such as OKX and MoonPay, have already announced their intentions to comply with FinProm. However, these rules have proven to be a significant hurdle for some companies, given the global scope of their operations.
Crypto exchanges like Binance and Bybit, for instance, have temporarily halted the onboarding of new users from the U.K. to align with the new regulations. Young points out that the FCA soon recognized the complexity of implementing the new financial promotion rules, given the additional layers of conduct and communication regulations that companies are expected to adhere to, in addition to Anti-Money Laundering requirements.
In September, the FCA extended the deadline for U.K.-registered crypto firms to address technical issues related to the new marketing regime, pushing the date to January 8, 2024.
Uniformity in Crypto Regulations Worldwide
Addressing the challenge of global crypto firms complying with the new FCA rules while maintaining consistency across different jurisdictions, Young stressed the need for legal entity segregation to smoothly navigate varying regulatory demands. He noted, “The FCA has recognized this as a challenge, particularly for firms with complex group structures. Some countries, like the U.K., have stringent regulations on the marketing of promotions, while others are yet to define their stance on regulating crypto firms.”
Recognizing the inherently global nature of cryptocurrency, Young emphasized the importance of regulatory uniformity across the globe. He expressed his desire for clearer guidance on how crypto firms should comply with these new regulations.
Calls for a Comprehensive Global Framework
The call for a more comprehensive global framework for the crypto industry is not new. On October 13, the Group of Twenty (G20), consisting of 19 sovereign nations, including the U.K., unanimously endorsed a crypto regulatory roadmap advocating for thorough oversight of cryptocurrencies within and beyond G20 jurisdictions.
While Young believes that regulation and trust are pivotal for the mass adoption of crypto, he underscores the importance of striking a balance between consumer protection and innovation in regulatory efforts. He welcomes regulation but emphasizes that it should be proportionate and fair, avoiding any unintentional consequences that could drive businesses out of the market. Such regulation should align with the evolving nature of the crypto market and its current state.
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