Under the proposals, the existing e-money safeguarding regime will be replaced with a client assets (CASS) style regime designed to work with payments firms’ business models. It will also publish strengthened interim safeguarding rules for firms by the middle of next year.

The FCA’s cost benefit analysis (CBA) of its proposals has also been subject to review by the new independent CBA Panel.

Commenting on the proposals, FCA Director of Payments and Digital Assets Matthew Long said: 'We’re consulting on proposals to make safeguarding rules stronger and clearer for payment and e-money firms so customers get as much of their money back as quickly as possible if the firm goes out of business.'

Firms can respond to the FCA’s consultation by 17 December 2024. 

The bill confirms the existence of a third category of personal property into which digital holdings including cryptocurrency, non-fungible tokens and carbon credits could fall.

Previously, digital belongings were not definitively included in the scope of English and Welsh property law.

The new law will therefore "give legal protection to owners and companies against fraud and scams, while helping judges deal with cases where digital holdings are disputed or form part of settlements, for example in divorce cases."

The action being taken on digital assets is in response to the Law Commission’s report in 2023. The Ministry of Justice commissioned the report to identify any barriers to the recognition of digital assets as property under English and Welsh private law and to recommend solutions. 

The Bill has been introduced into the House of Lords under the special parliamentary procedure for Law Commission bills.

The Government also announced in a written statement that it accepts the recommendation to set up an expert group who can provide guidance on technical and legal issues relating to digital assets. The Ministry of Justice has asked the UK Jurisdiction Taskforce (UKJT), an expert group chaired by the Master of the Rolls that produces non-binding guidance on areas of legal uncertainty, to take forward this work.

See also the press release from the Law Commission regarding the new bill.

This review looked at how firms are implementing personalised risk warnings, the 24-hour cooling off period, client categorisation and appropriateness assessments.

A change in legislation brought cryptoasset promotions under the FCA's remit. From 8 October, it has been supervising firms against the new regime that is designed to give consumers the right information and risk warnings.

Since 8 October, the FCA has identified three common issues with cryptoasset financial promotions. These include: 

• promotions making claims about the ‘safety’, ‘security’ or ease of using cryptoasset services without highlighting the risk involved;
• risk warnings not being visible enough due to small fonts, hard-to-read colouring or non-prominent positioning; and  
• firms are failing to provide customers with adequate information on the risks associated to specific products being promoted.

The FCA said it expects authorised firms approving the financial promotions of cryptoasset firms to "take their regulatory obligations seriously". Where this is not happening, it will "take action" and has already placed restrictions on an authorised firm to restrict it from approving cryptoasset financial promotions.

The FCA said it expects businesses including "social media platforms, app stores, search engines, domain name registrars and payments firms to consider the alerts it has issued and play their part in protecting UK consumers from illegal promotions."

Since 8 October 2023, firms wishing to promote cryptoassets in the UK must, by law, be authorised or registered by the FCA, or have their marketing approved by an authorised firm. 

Under FCA rules, promotions must also be "clear, fair and not misleading, labelled with prominent risk warnings and must not inappropriately incentivise people to invest." These changes bring cryptoassets in line with other high-risk investments. 

The financial promotion regime applies to "all firms marketing cryptoassets to UK consumers, regardless of whether the firm is based overseas or what technology is used to make the promotion." The FCA’s rules are designed to help people understand what they are purchasing, and the risks involved.  

The policy statement supports legislative changes by the Government within the Financial Services and Markets Act 2023. Once the new gateway comes into effect, all authorised persons that want to continue to approve financial promotions for unauthorised persons will need to apply to the FCA for permission to do so (subject to certain exemptions). 

The FCA's finalised approach, set out in the policy statement, includes:   

• how it will assess applicants at the gateway and the basis for our granting or refusing applications 
• reporting requirements for firms that are granted permission to approve financial promotions 
• not extending the compulsory jurisdiction of the Financial Ombudsman Service to the approval of financial promotions 
• updates to its non-Handbook guidance for firms that approve financial promotions for investments 
• a review of its approach within 24 months of the rules coming into force.

The FCA intends for firms to be able to submit applications for permission to approve financial promotions from 6 November 2023. The initial application period will close on 6 February 2024. On 7 February 2024 the new legislation will be implemented and firms that have not applied to the gateway will no longer be able to approve financial promotions (subject to exemptions).  

Firms that apply at the gateway during the initial application period will be able to continue approving financial promotions for unauthorised persons while the FCA determines their application. 

If firms that do not apply at the gateway during the initial application period want to approve financial promotions in the future, they can apply for permission to approve using a variation of permission form. However, they will not be able to approve financial promotions until the FCA has determined their application as successful. 

Applicants for Part 4A permission will also be able to begin applying for permission to approve financial promotions from 6 November 2023. 

To help firms to prepare their applications, the FCA has set up a webpage on applying to approve financial promotions for unauthorised persons. The questions that applicants will be asked are listed in Annex 1 and 2 of the policy statement.